The US dollar declined on Thursday after the US Federal Reserve Chairman Jerome Powell supported the interest rate cuts later this month, promising to “act appropriately” to ensure that the world’s largest economy will keep its decade-long growth.
In his testimony to the Congress, Jerome Powell pointed to the “wide” global economic weakness that blurred the US economic outlook in a context of uncertainty as a consequence of the trade dispute of the Donald Trump’s administration with China and other countries.
Adding to this the latest minutes of the previous Fed Board meeting, many politicians and analysts believe that bigger incentives will be needed soon, effectively boosting speculation about aggressively lowering interest rates.
The bets for Federal Reserve to lower interest rates by 50 basis points at its next monetary policy meeting scheduled for July 30-31 rose to about 30%.
The US Dollar Index, which measures the greenback versus a basket of its main rivals, remains on the defensive on Thursday after breaking below the 97.00 support. The index is navigating the area of weekly lows near 96.80 in response to the dovish message from Chief Powell and the FOMC minutes on Wednesday. Further south emerges the critical support at the 96.84/69 band, where coincide the multi-month support line and the critical 200-day SMA. A move to this area could threaten the constructive view on the buck. In case bulls regain some attitude, initial resistance should come in at 97.59, monthly peaks, ahead of June peak at 97.80.
The EUR/USD pair remains parked in the 1.1270-1.1280 range. The European currency keeps the buying bias unchanged so far today.
Spot kept the composure after the ECB minutes from the last meeting showed the Governing Council is ready to ease policy further in light of declining inflation expectations and the ongoing slowdown in the bloc.
The pair has managed to gain around a cent since weekly lows in the 1.1180 region (Tuesday) after remarks from Fed’s Powell and the FOMC minutes came in on a more dovish tone than initially expected.
Data wise today, German final CPI for the month of June noted prices rose 0.3% inter-month and 1.6% on a yearly basis, matching the preliminary readings. Later today, all eyes will be upon the publication of inflation figures in the US economy last month.
At the moment, the EUR/USD pair is gaining 0.21% at 1.1273 and a break above 1.1283 (21-day SMA) would target 1.1325 (200-day SMA) en route to 1.1412 (high June 25). On the other hand, the next down barrier lines up at 1.1193 (monthly low July 9) followed by 1.1181 (low June 18) and finally 1.1106 (2019 low May 23).
On Wednesday, the USD/JPY currency pair tumbled to the 108.20 level. During Thursday’s reversed north from the lower boundary of the short-term ascending channel at 107.90.
It is unlikely, that some upside potential could prevail in the market due to the resistance cluster formed by the 55-, 100– and 200-hour SMAs, as well the weekly PP and the Fibo 38.20% in the 108.22/108.61 range.
Note, that the exchange rate is supported by the weekly S1 and the monthly PP at the 107.84 mark. Thus, it is likely, that the rate could trade sideways between the given support and the given resistance.
The British pound regained from its six-month low, rising to 1.2529 USD. But it is still at a weekly loss, as the British currency is under pressure from the economic gloom over the UK and uncertainties surrounding Brexit.
Numerous grim details in the UK and Britain’s risk of leaving the European Union without negotiating transitional trade agreements have forced the Central Bank of England to change its optimistic assessment of the economy.
The GBP/USD exchange rate jumped to the 100-hour moving average at the 1.2504. During today’s morning, the rate surged to the resistance formed by the 200-hour SMA at 1.2555.
If the given resistance does not hold, it is likely, that the currency pair could continue to go upwards. However, note, that the pair has to surpass the weekly PP at the 1.2574 mark.
Otherwise, if the given resistance holds, it is expected, that the rate could reverse south within the following trading hours. It is unlikely, that the pair could drop lower than the 1.2488 mark due to the support of the 55-hour SMA.