The USD had a great year until the end of September, as it kept surging on the fact that the FED was tightening pretty fast, delivering several 75 bps rate hikes in the last several meetings. The sentiment improved after intervention from Japanese and UK officials to stabilize the markets and the USD started retreating as a safe haven, while risk assets started to turn bullish.

Although the real decline came in November and the first two days of December, as the FED rhetoric grew less hawkish and the economic indicator showed a softer economy, with manufacturing falling in contraction. As a result, the USD turned quite bearish and the stronger non-farm payrolls and earnings figures on Friday couldn’t help it. We saw a 1-and-a-half-point jump in the DXY that day, but the 200 SMA (purple) which was acting as support before turned into resistance and the price returned back down, closing another upside-down hammer candlestick, which is a signal for a bearish continuation.

So, even the positive economic events are not helping the USD much, since all the attention is on the FED and their rate hikes. They are making it clear that they are slowing down, which is right since not only are they failing to have any impact on inflation, but they are hurting the economy and the consumer further. FED member Bowman made some bold comments on Friday, which were clearer than Jerome Powell’s comments.

FED’s Bowman Comments

• It is appropriate for us to slow the pace of increases
• Expect policy will remain restrictive for some time to get inflation down
• My views on the size and pace of rate hikes will be guided by incoming data
• I expect ongoing increases in rate hikes at coming meetings
• Headline and core inflation have slowed slightly but are still unacceptably high
• I expect a ‘slightly higher’ terminal rate than I had anticipated in September

This means that the situation will remain bearish for the USD. Although, other major central banks are slowing as well, so the downside might be limited too.  But for now, sellers are in total control and the decline has resumed again after stalling during the second half of November.