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US Dollar Price Outlook Still Positive as Markets Wait for Powell Testimony

US Dollar Price Outlook Still Positive as Markets Wait for Powell Testimony

Martin Essex, MSTA, Analyst

USD price, news and analysis:

  • Jerome Powell, who chairs the US Federal Reserve, will give his semi-annual testimony to Congress today and tomorrow.
  • He will likely strengthen forecasts of a quarter-point US rate cut at the end of this month but could also dampen expectations of more rate reductions to follow soon.
  • That would be another positive signal for US Dollar bulls.

US Dollar price outlook constructive

Federal Reserve Chair Jerome Powell will give his semi-annual testimony to Congress today and tomorrow, beginning with an appearance before the House Financial Services Committee and ending with a further appearance before the Senate Banking Committee.

He is most unlikely to dampen speculation of a 25 basis points reduction in US interest rates to the 2.00%-2.25% range from the current 2.25%-2.50% when the rate-setting Federal Open Market Committee ends its next meeting on July 31. Market pricing currently puts the chances of such a cut at 94.5%.

However, for the US Dollar, the key question is whether Powell hints at more rate reductions to come or leans towards a pause before they are cut again. For the moment at least, the latter looks more likely and that would support the Greenback and potentially prompt a further advance after its recent gains.

USD Index Price Chart, Hourly Timeframe (June 25 – July 10, 2019)

Latest US Dollar price chart.

Chart by IG (You can click on it for a larger image)

As I reported here yesterday, bullish factors are beginning to build for the USD. In particular, US and Chinese trade officials held a “constructive” phone conversation yesterday, according to White House economic adviser Larry Kudlow. Moreover, yields on US Treasury notes and bonds look to be rising again.

Cautious traders should perhaps wait for the release today, after Powell speaks, of the minutes of the FOMC meeting on June 19 for further clues on the Federal Reserve’s current thinking but both fundamentally and technically the USD looks well placed to make further gains.

Click this link to find out how gold could respond to Powell’s testimony

And click here for longer-term forecasts for the USD and other currencies

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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

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