. USD Faces Reversal Amid Powell's Appearance - Capital Street FX

USD Faces Reversal Amid Powell’s Appearance

USD Faces Reversal Amid Powell’s Appearance

16 Apr 2024

As Tuesday’s US trading session commences, the US Dollar begins to retreat in anticipation of Powell’s appearance.

  • The US Dollar extends its winning streak for the fifth consecutive day but may soon face a reversal.
  • Investors anticipate a potential shift in tone from Fed Chairman Powell on Tuesday.
  • The US Dollar Index approaches the 106 level once more, hinting at a possible break below, akin to Monday’s movement.

As the US session approaches, the US Dollar Index (DXY) pauses its upward momentum, prompting a reversal and a slight decline in the Greenback. However, in the larger context, the US Dollar benefits from the recent shift in the interest rate narrative, favoring it against other currencies. Furthermore, Israel’s commitment to retaliating against Iran, despite diplomatic efforts to de-escalate tensions, adds to the Greenback’s strength, intensifying concerns about the region’s stability.

Regarding economic data, the upcoming data releases on Tuesday are not expected to significantly impact the US Dollar. The primary focus lies on three Federal Reserve (Fed) speakers, particularly Fed Chairman Jerome Powell, who holds the most significance. Powell’s speech has the potential to alter market dynamics, as any modification in language regarding rate cut expectations or the Fed’s outlook could either propel the Greenback to further highs or initiate a substantial retreat.

USD Technical Analysis:

The US Dollar Index (DXY) is dominating the market, highlighting a stark contrast between weak and strong currencies. The Greenback appears to be the primary beneficiary, particularly as Europe and China struggle to maintain steady rates. With these major currencies expected to depreciate significantly in the foreseeable future, it seems unlikely that the reign of the US Dollar will end anytime soon, especially if US data continues to outshine expectations. Those betting on a weaker US Dollar may find their positions increasingly challenged.

Looking at potential gains, the initial resistance level for the DXY is at 106.01, marking the high from November 10, slightly above the psychological level of 106.00, which was breached overnight. Moving beyond that, if the DXY Index continues upward, it may encounter resistance around 107.35, corresponding to the high reached on October 3.

Looking at potential declines, the first significant level is at 105.88, which has been a crucial level since March 2023 and demonstrated its significance on Monday by holding support. Moving lower, additional support can be anticipated around 105.12 and 104.60. Further down lies a region supported by both the 55-day and the 200-day Simple Moving Averages (SMAs), situated at 103.97 and 103.84, respectively.