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USD Index Back Above 95.000

The end-all-be-all to the Greenback’s value is the United States Federal Reserve. Economic metrics certainly play a role in forex price action. Regardless, when it comes to the long-term outlook for the USD, FED policy is the single most important factor.

Wednesday gave us a prime example of just how powerful the FOMC, FED, and Chairman Jerome Powell are. They shifted their stated policy 180 degrees from that of last September ― and the Greenback fell precipitously across the majors. Subsequently, March USD Index futures plummeted beneath the psychological barrier of 95.000.

So, which direction is the USD headed for the remainder of 2019? That is the question currency traders around the globe are now asking. Given a passive FED and a pending economic slowdown, 95.000 may end up being an intermediate-term top, not bottom.

March USD Index Futures: Technical Outlook

Led by losses against the Canadian dollar, the USD did not perform well during Jerome Powell’s first address of the year. As a result, the March USD Index fell dramatically before rebounding above 95.000.

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

Bottom Line: For the near future, I will have buy orders queued up from just above the Double Bottom (94.635) at 94.655. With an initial stop at 94.490, this trade produces 33 ticks on a standard 1:1 risk vs reward management plan.

From a fundamental perspective, it is tough to make the case for a long-term appreciation of the USD. Unless we see robust economic growth that forces the FOMC to tighten policy, the Greenback is likely to weaken by this time next year. With U.S. GDP for Q1 likely to lag due to the government shutdown, and the Brexit picture coming into focus, the USD Index has more room to the downside.

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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