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US Dollar Analysis: Fed Chair Powell Likely to Re-Invigorate USD

US Dollar Analysis: Fed Chair Powell Likely to Re-Invigorate USD

Nick Cawley, Strategist

USD Price, News and Technical Analysis

  • US Federal Reserve Chairman Jerome Powell will update the market on the US economy.
  • Short-dated US Treasury yields will continue to support the greenback.
  • US stock market wobbles.

The DailyFX Q3 Forecasts have just been released and cover all the major asset classes.

USD Supported by Treasury Yields and Strong Fundamentals

US Fed Chair Jerome Powell will answer questions on the economy later in the session today with market participants keen to hear his view on interest rates and the the play-off between a strong domestic economy and global trade war fears. Powell may also address the latest moves in US Treasury bond yields with the 2-year hitting a near-decade high (2.595%), while further out along the curve the 10-year currently is quoted at 2.86%, a mere 26 basis points more than the 2-year. This flattening curve – and it may well invert – normally signals a recession ahead and may well weigh on Powell’s decision on the number of interest rate hikes next year.

Weekly USD Forecast – Trade Wars vs Economic Fundamentals – The Battle Continues

US Treasury 2-Year Yield Chart (January 2006 – July 17, 2018)

US Dollar Analysis: Fed Chair Powell Likely to Re-Invigorate USD

US Dollar Weakness is Temporary

The greenback continues to drift lower, but support should kick-in soon from a positive interest rate backdrop and Fed Chair Powell’s commentary. In addition, the US stock market is struggling to move higher and starting to show signs of exhaustion which may well lead to a risk-off move and rottion back into the USD. One of the tech market darlings’s Netflix yesterday slumped around 12% after-hours when it reported lower-than-expected subscription growth, a timely reminder that some equity valuations are running ahead of themselves.

The US dollar index currently trades around 94.01 with strong support seen around the 93.85 level. The DXY is currently trading between the 20- and 50-day moving average and needs to clear this before it can re-test the recent 94.88 level. The RSI currently trades mid-market and is giving no clear signal.

US Dollar Index (DXY) Daily Price (October 18, 2017 – July 17, 2018)

US Dollar Analysis: Fed Chair Powell Likely to Re-Invigorate USD

If you are new to foreign exchange, or if you would like to update your knowledge base, download our New to FX Guide and our Traits of Successful Traders to help you on your journey.

What’s your opinion on the US dollar? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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