USD index

USD Index Futures Retrace As Powell Speaks

Posted Friday, January 4, 2019 by
Shain Vernier • 2 min read

About an hour ago, FED Chairman Jerome Powell took the stage in Atlanta to issue some prepared comments and field questions from the gallery. While not a primary FED event, the markets were still watching the exchange closely. Price action reflected a perceived dovish tone from the FED Chairman, with equities marching north and the USD slipping vs the majors.

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Takeaways From Powell’s Comments

Powell’s first public engagement of 2019 brought a few items worthy of note. Here are the highlights from his prepared comments:

  • “Inflation has been muted. We [FED] will be patient as the economy evolves.”
  • “The FED is listening carefully to market’s risk concerns”
  • “We [FED] will be prepared to adjust policy quickly and flexibly”
  • December’s sell-off in equities is “something worth keeping an eye on”

Add it all up: FED policy is now flexible and its future course will be determined on-the-fly.

March USD Index Futures

The past two weeks of holiday trade have been challenging for March USD Index futures. Rates have stalled beneath daily topside resistance. Today’s somewhat dovish commentary from Powell has done little to bring the USD bulls out of hiding.

March USD Index Futures (DX), Daily Chart
March USD Index Futures (DX), Daily Chart

Here are two topside resistance levels to watch until today’s closing bell:

  • Resistance(1): Bollinger MP, 96.150
  • Resistance(2): Daily SMA, 96.415

Overview: At press time, the USD Index is very near corrective territory. While long-term uptrend of 2018 is still technically valid, the new “flexible” tone from the FED has this market in a state of flux. I expect rates to slip from current levels and put in a hard test of 95.000 by mid-January as a result of the newly dovish tone.

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