US Dollar Flies on Hawkish Powell


  • The U.S. greenback, as measured by the DXY index, rallies on hovering U.S. bond yields
  • Powell’s hawkish feedback reinforce the dollar’s advance
  • This article examines EUR/USD, USD/JPY, AUD/USD and gold costs from a technical standpoint, analyzing key ranges to look at within the coming days

Most Read: Gold, Silver Prices Perk Up, Palladium in Freefall, Key Levels for XAU/USD, XAG/USD

The broader U.S. greenback started the session on a subdued tone however rallied in afternoon buying and selling, pushed by hovering yields following lackluster demand for U.S. authorities securities at an necessary Treasury public sale. The dollar’s upward momentum was later supercharged by Fed Chair Powell’s hawkish statements throughout a panel organized by the IMF.

In public remarks, the FOMC chief stated that policymakers will not be assured that they’ve achieved a sufficiently restrictive stance to return inflation to the 2.0% goal in a sustained method. He additionally indicated that additional progress on cooling value pressures just isn’t assured and that stronger development may warrant increased charges. When it was all stated and carried out, the DXY index was up practically 0.4% on the day.

Taken collectively, Powell’s feedback counsel that the central financial institution just isn’t 100% satisfied that the mountaineering cycle is over. This may imply one other potential hike subsequent month or in January, particularly if monetary situations proceed to ease, as has been the case since late October (tech shares have been on a bullish tear ignoring immediately’s efficiency).

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Related: Australian Dollar Forecast – AUD/USD Extends Bearish Reversal in Fakeout Fallout

For the time being, expectations will stay in a state of flux, with sentiment shifting with the power or weak spot of information releases. For this cause, it’s crucial that merchants maintain a watch on the financial calendar within the coming days and weeks. That stated, one key report price following is the October shopper value index survey, due out subsequent Tuesday.

In phrases of analysts’ projections, headline CPI is forecast to have risen 0.1% on a seasonally adjusted foundation final month, bringing the annual fee all the way down to 3.3% from 3.7% beforehand. The core gauge, for its half, is seen rising 0.3% month-to-month, leading to a yearly studying of 4.3% – unchanged from September.

With the Fed hypersensitive to incoming data and scared of inflationary dangers, any upward deviation of official information from consensus estimates ought to increase bond yields and strengthen the case for increased rates of interest for longer. This state of affairs could be optimistic for the dollar, however damaging for gold, the euro, the Australian greenback and the yen.

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After dealing with rejection from Fibonacci resistance at 1.0765, EUR/USD has undergone a fast pullback, with the trade fee now flirting the decrease restrict of a assist band at 1.0650. The bulls should defend this flooring in any respect prices – failure to take action can ship the pair reeling, driving costs towards trendline assist at 1.0555. On additional weak spot, the opportunity of a retest of the 2023 lows become visible.

In case the market turns and sentiment swings in favor of the bulls, the primary technical barrier to look at seems at 1.0765, the place the 200-day easy transferring common aligns with the 38.2% Fib retracement of the July/October decline. Overcoming this confluence of key ranges may reinforce the bullish momentum, paving the best way for a transfer in direction of 1.0840.


EUR/USD Chart Created Using TradingView

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USD/JPY pulled again final week, however has reasserted its upward momentum, taking out an necessary ceiling at 150.90 and charging in direction of its 2022 and 2023 highs, simply shy of the psychological 152.00 mark. With costs on a bullish tear and approaching an necessary tech zone, merchants ought to train warning as Tokyo might step in any minute to curb speculative exercise and forestall additional yen depreciation.

In the occasion of FX intervention by Japanese authorities, USD/JPY may shortly sink beneath 150.90 and head in direction of the 149.00 deal with. On additional weak spot, the main focus shifts to 147.25, adopted by 146.00. If Tokyo stays out of forex markets and permits the trade to float above 152.00, a possible rally in direction of the higher boundary of a medium-term rising channel at 153.40 turns into conceivable.


USD/JPY Chart Created Using TradingView

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Change in Longs Shorts OI
Daily 2% -8% -1%
Weekly 21% -30% 4%

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AUD/USD fell for the fourth straight session on Thursday, erasing all good points accrued following final week’s bullish breakout, which turned out to be a fakeout. After this pullback, the pair has arrived at an necessary assist close to 0.6350. The integrity of this space stage is significant; a failure to keep up it may end in a drop in direction of 0.6325. On additional weak spot, a revisit to this yr’s lows may very well be within the playing cards.

Despite the current setback for the Australian greenback, the bullish state of affairs shouldn’t be completely dismissed. That stated, if the bulls engineer a comeback and set off a rebound off present ranges, overhead resistance seems across the 0.6400 deal with, adopted by 0.6460. Successfully overcoming this technical barrier may reignite bullish momentum, opening the door for a rally towards the November highs close to 0.6500.


AUD/USD Chart Created Using TradingView

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Change in Longs Shorts OI
Daily 0% -3% -1%
Weekly 2% 5% 3%

What does it imply for value motion?

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Earlier this week, gold reversed decrease when the bulls didn’t take out a vital ceiling within the $2,010/$2,015 space. However, XAU/USD has began to perk up after this setback, with costs encountering assist across the 200-day easy transferring common forward of a modest bounce. If good points decide up tempo within the coming buying and selling classes, preliminary resistance seems at $1,980, adopted by $2,010/$2,015.

Conversely, if sellers return and regain the higher hand in monetary markets, the primary flooring to watch is positioned at $1,945, which aligns with the 200-day SMA. Although gold may discover a foothold on this area throughout a pullback, a breakdown may immediate a descent in direction of $1,920. Below this area, the main focus transitions to $1,900.


Gold Price Chart Created Using TradingView

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