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US Dollar Price Action Set Up Ahead of Fed Chair Powell Speech

US Dollar Price Action Set Up Ahead of Fed Chair Powell Speech

Justin McQueen, Strategist

USD Price Analysis & News

  • All Eyes on Fed Chair Powell
  • Fed Hawks Out in Force

Fed Chair Powell takes centre stage today as market participants look for additional clues as to when an announcement over the tapering of QE will take place. In light of Fed’s Kaplan (hawkish) comments made last week that the spread of the Delta variant could adjust his views on policy and with the Jackson Hole Symposium becoming a virtual summit this has stoked expectations that Powell may provide a more cautious statement. However, what is interesting to note is that the Fed commentary ahead of Powell’s speech has come from the more hawkish members, alongside this, Kaplan’s most recent comments suggest that his view on the spread of the Delta have not adjusted his views. In turn, the risk may be more geared towards a more hawkish than expected outcome.

Volatility Measures Remain Subdued

Taking a look at EUR/USD one day implied volatility, option markets are not expecting a notable move in the FX space. Although, given how the Fed has tended to surprise in recent months, volatility measures could be somewhat misleading, while summer trading conditions may also be keeping implied volatility low.

Fed Hawks Out in Force

Fed's Kaplan says he does not see anything at the point that would cause him to materially change his outlook, business contacts are weathering Delta at least as well as previous surges.

Fed’s Bullard says he wants to get going on tapering this year. Reiterates that he wants taper completed by end-Q1 2022.

Fed’s George says the Fed should start on QE tapering this year; there has been good progress on the economy, inflation is coming in strong and suggests an opportunity to dial back QE but haven't seen the labour market fully recover.

Source: Refinitiv, Bloomberg

EUR/USD: Near term resistance resides at the 1.1800 handle and while markets are attempting to put in a short term base, it would take a close above 1.1800 to confirm. Risks remain lower for now as EUR/USD puts in another lower high, while the RSI fails to move above 50.

EUR/USD Chart: Daily Time Frame

US Dollar Price Action Set Up Ahead of Fed Chair Powell Speech

Source: Refinitiv

EUR/USD Tech Levels

US Dollar Price Action Set Up Ahead of Fed Chair Powell Speech

US Dollar: Short term support at 92.80 continues to hold firm with the greenback back above 93.00. A break below 92.80 however, opens the door to 92.50, while on the topside a push through 93.20 puts 93.50-60 in focus.

USD Chart: Daily Time Frame

US Dollar Price Action Set Up Ahead of Fed Chair Powell Speech

Source: Refinitiv

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