Markets Hit Back Hard While the USD Crumbles

The USD fell away sharply and equities bounced back with vengeance as comments from the FED boss resonated around the globe.

In a speech, Jerome Powell suggested that the current level of interest rates is now near their neutral level. We have to put this in the context that the market has been expecting a rate hike in December and two more in 2019.

While the December hike might well be on the cards, the 2019 hikes are certainly going to be questioned going forward and a lower chance of a rise will start to get priced in. That is really what we saw with the selling in the USD.

Equity markets took the news as a huge boost and they rallied sharply across the board, finishing up 2.3% in the case of the SPX with the NASDAQ up 3.22%.

This move from Powell is really going to shake things up going forward and I feel that this might give equities a real spark after a period of selling pressure.

The USD Outlook

The DXY once again cracked the resistance level turned support at 97.00 and is now sitting below that point.

For now, 97.00 becomes resistance with R2 at 97.70-80.

Support will again be at 96.00-20 and I suspect there might be more weakness ahead for the USD.

If the entire hawkish outlook from the FED is changing then that really changes the outlook for the USD and equities.

That was a huge announcement from Powell in my opinion.