The US dollar remains close to its 3-week low on Wednesday after Federal Reserve Chairman Jerome Powell reiterated that the central bank would remain patient with monetary policy.
The US dollar index, which measures the value of the greenback against a basket of six major currencies, remained at 96.056 points after losing 0.4% at night when it dropped to 95.948 points, the lowest level since February 5.
Powell said on Tuesday that the rising risks and weaker economic data would hardly prevent the steady growth of the US economy this year, but the Fed will remain “patient” in its decisions to further raise interest rates. For market participants, Powell’s statement is a signal that the Fed may raise interest rates at least once more in 2019.
However, according to the analysts, the fall of the US dollar is a little puzzling, as Powell’s comments do not offer any new information. But the market was in a state where the dollar was sensitive to potential downside factors and the strong British pound pressed the US currency
EUR/USD hits new 3-week highs, surging through 1.1400 handle, ahead of US GDP. After yesterday’s modest pull-back, the EUR/USD pair caught some aggressive bids on Thursday and surged to over three-week tops in the last hour.
Today’s uptick could further be attributed to some cross-driven strength, stemming out of a goodish bounce in the EUR/GBP cross, with technical buying above the 1.1400 round figure mark providing an additional boost to the pair’s strong intraday rally.
The Euro maintains bullish bias and consolidates under the daily cloud. Bulls repeatedly failed to close above barriers at 1.1389/92 (100SMA) and attack pivotal resistance at 1.1407 (Fibo 61.8% of 1.1514/1.1234), break of which would generate a bullish signal for the continuation of recovery rally from 1.1234 (February 15).
Strengthening bullish momentum continues to support and daily cloud twist (1.1409) attracts bulls. Broken 30SMA (1.1362) holds and underpins the action, with support being reinforced by 5/30SMA bull-cross.
An eventual break above 1.1407 area would open the way towards 1.1448/57 (Fibo 76.4% of 1.1514/1.1234).
Conversely return and close below 30SMA would weaken the near-term structure, while dip below converged 20/10SMA’s (1.1345) would signal a reversal.
The British pound continued its rise on Tuesday after British Prime Minister Theresa May offered MPs the opportunity to vote to postpone Brexit to prevent a chaotic departure from the European Union. The pound climbed on Wednesday by 0.1%, to 1.3261 USD, after rising by more than 1% overnight to a five-month high of 1.3288 USD.
If the British pound overcomes successfully the resistance range 1.3361-1.3366 USD, it may target reaching and testing the zone 1.3414-1.3417 USD. Upon success, the upward trend will continue to 1.3478-1.3484 USD.
If the British pound fells below the support area of 1.3249-1.3243 USD, then the next support will be the zone 1.3181-1.3179 USD. In case of a breakthrough, the downward trend will continue to 1.3131-1.3125 USD.
The Australian dollar also rose to 0.7195 USD, and the increase is for the fourth consecutive session. The Australian dollar was hurt in early February after the Reserve Bank of Australia opened the door to cut the interest rate. But the Australian currency recovered by nearly 2% of its lowest level this month from 0.7054 USD on February 12.
The differences in central bank monetary policy reduce the stimulus to the currencies, and after the Fed turned to a more encouraging position, it forced the other central banks to follow suit. Now risky appetite is a key incentive, and currencies like the Australian take advantage of risk.
If the Australian dollar successfully overcome resistance zone 0.7174-0.7182 USD, it will move to reach and test the zone 0.7222-0.7225 USD. Upon success, the upward trend will continue to 0.7246-0.7254 USD.
If the Australian dollar fells below the support zone of 0.711-0.7103 USD, then the zone will be 0.7082-0.7078 USD. In a breakthrough, the downward trend will continue to 0.7039-0.7031 USD.