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US Dollar Remains Fortified by Supportive Fed Policy

US Dollar Remains Fortified by Supportive Fed Policy

Nick Cawley, Senior Strategist


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USD Price, News and Technical Analysis

  • Independent Federal Reserve will keep on raising rates.
  • PBOC weakens the Yuan – post-Trump commentary – by 0.9% versus the US Dollar.

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

US Dollar Uptrend Remains Intact but Momentum May Slow

US President Donald Trump’s latest outburst puts him at loggerheads with the Federal Reserve, and this is one battle he is unlikely to win. The President said that he was ‘not thrilled’ that interest rates were rising but at the same time he was letting the Fed ‘do what they feel best’. The dollar turned immediately lower, after racking up strong gains on the day, but the downturn was minimal with the US Dollar Basket (DXY) just under 05, while US 2-year Treasury yields (2.595%) remain around 4 basis points off a decade high.

President Trump also complained that the Chinese Yuan’was dropping like a stone’ putting the US at a disadvantage. The Yuan has weakened by around 9% since Trump instigated a trade war with China, and the PBOC weakened the Yuan further after President Trump’s comments by 0.9%, the most since mid-2016.

The market is carefully watching the recent depreciation of the Yuan, fearful that it may spark an all-out currency war with the US, alongside the ongoing trade spat.

DXY Index Hits Fresh Yearly High as China Wages Currency War.

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

USDJPY Rattled but Trend Remains

The Japanese Yen is the goto ‘risk-off’ asset currently, along with the Swiss Franc, and should have appreciated sharply on both President Trump’s commentary and the PBOC’s Yuan depreciation. However the move in USDJPY was just over 100 basis points and the pair closed the session mid-market, not a usual risk-off trading move. The pair currently trade around 112.400, just off yesterday’s six-month high print at 113.178. While President Trump may want to see the USD lower, the independent Federal Reserve will continue to raise interest rates to curb high inflation. The US economy is expected to reveal annualized second-quarter growth of 3.8% next Friday, up from 2% in Q1, while unemployment in the US is at its lowest levels in four decades.

USDJPY Pending Long on Minor Set-Back (Trading Idea)

USDJPY Daily Price Chart (September 2017 – July 20, 2018)

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 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.