Powell Comments Drive USD Lower
The US Dollar remains under pressure into the back end of the week. Yesterday hawkish remarks from Powell failed to lift the greenback, with traders instead focusing on weaker US economic prospects as a result of the ongoing trade war. Powell warned that tariffs created upward risks for US inflation, noting that the Fed’s job is to keep longer-term inflation expectations well-anchored. The Fed president warned that Trump’s tariffs were creating unprecedented conditions and made it very difficult for the Fed given the risks of higher unemployment but also higher inflation. Powell went on to say that the bank’s best move at this point is to stay on hold until it can see clearly how tariffs are impacting US economic data.
US Economic Fears
Despite Powell’s message, USD remains weak as traders look past the rates implications of his message and focus instead on the economic implications. Fears of a US recession this year have become a major headwind for USD, driving capital away from the greenback and into other safe-havens such as gold and JPY. Indeed, JPY looks likely to attract further capital away from USD if trade talks between the US and Japan go well. Trump noted yesterday that initial meetings showed promise. There has been plenty of speculation over whether these talks will include an agreement to keep USDJPY anchored lower which, if seen, should add to bearish sentiment in USD near-term.
Technical Views
DXY
For now, DXY is holding below the bear channel lows around the 99.56 level support. Momentum studies remain bearish here keeping risks pointed towards a fresh leg lower while price holds beneath the 101.91 level. Below, 97,76 is the next bear target to look to.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.