The US Dollar regained positive traction on Tuesday and was further supported by the Fed Chair Jerome Powell’s upbeat outlook for the US economy. Powell’s comments suggested that uncertainty over trade policy will not prevent the Fed from raising interest rates further and provided a strong boost to the greenback. The EUR/USD pair witnessed a sharp reversal and tumbled nearly 100-pips from a multi-day high level of 1.1745. Tuesday’s mixed US economic data – industrial production and capacity utilization rate did little to influence the price action, with resurgent USD demand turning out to be an exclusive driver of the pair’s intraday fall. The pair continued losing ground through the Asian session on Wednesday as market participants look forward to the final Euro-zone CPI print for June. With market focus moving back to the Fed-ECB monetary policy divergence, a downward revision of the inflation figures would exert some additional downward pressure on the shared currency.
The dollar is continuing its upside momentum on the day, with bids across the board to trade at session highs against almost all the major currencies right now. EUR/USD is down to 1.1635 with GBP/USD touching a low of 1.3095 on the day. Powell’s testimony focused on the strength of the U.S. economy while, arguably, minimizing downside risks. Comments regarding the strength of the labor markets and inflation running close to its target objective were similar in nature compared with prior central bank communication. In providing forward guidance, Powell stated that the job market is expected to remain strong while inflation remains near its 2% objective over the next several years, so long as monetary policy remains appropriate.
From a technical perspective, the pair’s inability to sustain/build on its momentum beyond 50-day SMA now seems to suggest prevalent selling interest on every attempted up-move. A subsequent break below a short-term ascending trend-channel support will reinforce the bearish bias and turn the pair vulnerable to resume with its prior depreciating slide. Weakness below the trend-channel support, currently near the 1.1630 area, is likely to accelerate the fall towards the 1.1600 handle before the pair eventually drops to 1.1565 horizontal zone en-route the key 1.1500 psychological mark, YTD lows. On the flip side, any meaningful up-move back above 1.1670 levels might continue to confront fresh supply around 50-day SMA, currently near the 1.1700 handle. Only a sustained move beyond the mentioned hurdle, leading to a follow-through momentum beyond 1.1745-50 resistance might negate the near-term negative outlook and assist the pair to continue with its positive momentum.
This article was originally posted on FX Empire
More From FXEMPIRE:
- GBP/USD Daily Price Forecast – Brexit Continues to Weigh On GBP/USD Ahead of UK CPI Data
- DAX Index Forecast – DAX Moves Higher
- GBP sinks, AUDJPY goes lower. USDCAD with a nice reversal pattern
- Gold Price Futures (GC) Technical Analysis – Hawkish Fed Driving Prices Lower; Could Be Big Sell Stops Under $1217.20
- AUD/USD Bearish Triangle Breakout
- Commodities Daily Forecast – July 18, 2018