The US dollar rose on Thursday after the report of the last Federal Reserve meeting revived the expectations for a possible US interest rate hike this year, and investors have focused on trade talks.
Greenback rallied slightly against the Japanese yen and recovered against the Euro late on Wednesday after the Federal Reserve published the report of its last meeting in January that says the US economy and its labor market remain strong, which revived the expectations among investors that there will be at least one hike in interest rates this year.
The US dollar index, which measures the value of the greenback against the basket of six major currencies, added 0.1% to 96.569 points, moving down from the two-week low of 96.286 points reached on Wednesday.
After five consecutive daily pullbacks, the index is now regaining some shine following yesterday’s drop to fresh tops in the 96.30/25 band.
At the moment, the US dollar index is advancing 0.10% facing the immediate hurdle at 97.37 (2019 high February 15) seconded by 97.71 (2018 high December 14) and then 97.87 (monthly high June 20, 2017). On the other hand, a breach of 96.29 (low February 20) will target 96.22 (38.2% Fibo of the September-December up move) en route to 95.58 (200-day SMA).
The Federal Reserve found the markets unprepared last month after the turnaround in policy direction, which was estimated by market participants that the regulator would end the three-year campaign to raise interest rates.
The dollar has made a small leap, as it appears that market participants have calmed down the signals that the Federal Reserve may raise interest rates this year. The focus of the investors will move back to trade. The deadline for trade talks between the US and China can be extended, and this may mean that Europe and Japan may start trade negotiations with the United States.
Donald Trump said on Wednesday that the US would impose import tariffs on European car imports if cannot reach a trade agreement with the European Union.
The Euro fell slightly to 1.1337 USD and moved away from the two-week high of 1.1371 USD reached earlier on Wednesday.
The pair EUR/USD still trades above the 50 Simple Moving Average on the four-hour chart, but Momentum is waning, and the Relative Strength Index is turning down. It is a bit of a mixed picture.
Support awaits at 1.1320 USD which was a low point earlier. The area of 1.1295 USD provided some support early in the week, and 1.1275 USD is already more significant: it is the weekly low. Further down, 1.1250 USD is a double bottom, and the 2019 low of 1.1235 USD is next down the line.
An area of 1.1335 USD capped the pair on Monday and is followed by 1.1372 USD, the peak seen on Wednesday. The main supports of EUR/USD in January were 1.1390 and 1.1405 and serve as resistance lines now.
A major engine in Asia was the Australian dollar, which also declined by 0.15% to 0.7151 USD. At the beginning of the session, the Australian dollar rose to a two-week high of 0.7207 USD, backed by strong employment data in January. The Australian currency, however, quickly lost its height after traders read the forecast of interest rate cuts made by the Westpac bank corporation.
The governor of Reserve Bank of Australia (RBA) Philip Lowe also ruled for the Australian downgrade after saying that the bank’s next move to interest rates could be either downward or higher.
AUD remains depressed in the second half of the week following earlier news that the Dalian port, one of China’s biggest, announced it will block imports of Australian coal, adding that it will limit the overall coal imports. In this regard, it is worth mentioning that coal exports are Australia’s top earner.
At the moment the pair is losing 0.79% at 0.7107 USD and a breakdown of 0.7085 USD (low February 21) would aim for 0.7075 USD (low January 25) and finally 0.7054 USD (low February 12). On the flip side, the next hurdle emerges at 0.7206 USD (high February 21) seconded by 0.7223 USD (high January 11) and then 0.7268 USD (200-day SMA).
The British pound fell by 0.15%, to 1.3031 USD, retreating even more than its 3-row peak of 1.3109 USD, touched the previous day. The pound weakened after three deputies left the ruling Conservative Party of British Prime Minister Theresa May. This move could have undermined Brexit’s new strategy. Supplemental pressure the pound received after Fitch Ratings said on Wednesday that it could lower the UK rating due to the growing uncertainty about Brexit.