. Dollar up after biggest drop in 2 months as Fed's Powell reaffirms hawkish outlook

Dollar up after biggest drop in 2 months as Fed’s Powell reaffirms hawkish outlook

Dollar up after biggest drop in 2 months as Fed’s Powell reaffirms hawkish outlook

18 May 2022

DOLLAR INDEX is trading up 0.34% at 103.525

The U.S. dollar edged higher on Wednesday, a day after posting its biggest single-day drop in more than two months after U.S. Federal Reserve chief Jerome Powell struck a more hawkish tone as the central bank battles to rein in surging inflation.

Powell pledged that the U.S. central bank would ratchet up interest rates as high as needed, including taking rates above neutral, to kill a surge in inflation that he said threatened the foundation of the economy.

The neutral rate is the level at which economic activity is neither simulated nor constrained and is widely expected at somewhere in the region of 3.5% by mid-2023.

At 1055 GMT, the U.S. dollar index was up 0.3% at 103.57, after earlier touching a two-week low following Tuesday’s 0.9% drop. It hit a two-decade high above 105 last week.

The euro briefly dropped below $1.0500, reversing an earlier rise to a one-week high, a day after European Central Bank policymaker Klaas Knot said a 50-basis point rate increase in July was possible if inflation broadens.

Knot is one of the more hawkish ECB members, Commerzbank (ETR:CBKG) analysts noted, adding that his view did not necessarily reflect the majority view on the ECB board.

On technical fronts DOLLAR INDEX RSI stood at 51.29 and currently it is trading below all MA. So, SELL position can be taken with following target and stoploss:

TRADE SIGNAL – : DOLLAR INDEX – SELL: 103.62, TARGET: 103.03, STOP LOSS : 104.01