Powell Speaks, USD Falters Vs The Forex Majors
Shain Vernier • 2 min read
December has started with a thud for the Greenback, with values falling across the forex majors. The big story has been the EUR/USD breaking out above 1.2000 as Fed Chairman Jerome Powell testified before Congress. Both Powell and Treasury Secretary Stephen Mnuchin are being questioned this week as mandated by last spring’s Cares Act.
Today’s engagement between Powell, Mnuchin, and Congress was interesting. Last month, Mnuchin rescinded $455 billion worth of funds directed toward the Fed. The move was ill-received by the central bank, which claimed the added liquidity would be necessary moving forward. Here are a few of this morning’s remarks from Powell and Mnuchin:
- “[Cares Act] programs serve as a backstop to key credit markets and have helped the flow of credit from private lenders through normal channels.”
- “The outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check.”
- “The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months.”
- “I continue to believe that a targeted fiscal package is the most appropriate federal response.”
- “I strongly encourage Congress to use the $455 billion in unused Cares Act funds to pass an additional bill with bipartisan support.”
- “The Administration is standing ready to support Congress in this effort to help American workers and small businesses.”
The potential of large stimulus packages being passed by mid-February 2021 is sending the USD south against the forex majors. Let’s take a look at how the USD/CHF has fared during this morning’s testimony.
The USD Is On The Ropes Versus The Forex Majors
For the USD/CHF, the psychological barrier of 0.9000 is back in play. Rates are currently challenging this level.
Bottom Line: The USD/CHF has been a big mover for today’s forex majors. If we see a test of November’s Low (0.8980), a buying opportunity may come into play very shortly.
Until elected, I’ll have buy orders in the queue from 0.8989. With an initial stop loss at 0.8964, this trade produces 25 pips on a 1:1 risk vs reward ratio.