The US dollar weakened against its major rivals like the Euro and the Japanese yen on Thursday due to growing expectations that the Federal Reserve (Fed) delay tightening of its monetary policy this year.
The minutes of the US Central Bank meeting on December 18-19 showed that several members of the Federal Open Market Committee (FOMC) support the idea of freezing interest rates in 2019.
US Dollar Index
The dollar index is stabilizing at 95.17 points after it lost 0.7% on Wednesday. The greenback has been weakening for four of the last five sessions, as traders have speculated that US interest rates will remain stable in 2019. The index rose by 4.3% in 2018 after the Fed raised interest rates four times due to strong domestic economic growth, declining unemployment, and rising wage pressures.
The dollar index is expected to remain under pressure today in light of speeches by Chief J.Powell, VP and permanent voter R.Clarisa (dovish), St. Louis Fed J.Bullard (voter, dovish), Richmond Fed T.Barkin (non-voter, centrist), Chicago Fed C. Evans (voter, centrist) and Minneapolis Fed N.Kashkari (non-voter, dovish). In the data space, the usual weekly report on the US labor market will be the only release today.
At the moment, the dollar index is losing 0.02% at 92.55 facing the next support at 95.03 (2019 low) seconded by 94.79 (low October 16, 2018) and finally 94.43 (low August 23, 2018). On the upside, a breakout of 95.96 (10-day SMA) would open the door to 96.44 (21-day SMA) and then 96.96 (2019 high).
EUR/USD pair analysis
The EUR/USD pair reached three-month tops at 1.1571 and from there embarked upon a corrective move lower, as the bulls look to test the 1.1500 level. the market participants expect downtrend in the paid in the next 2-3 weeks.
The short-term constructive outlook around the pair is expected to remain in place while above the 2-month support line.
The continuation of the up move should meet the next relevant hurdle in the 1.1620/30 band, where sit October’s peak and the critical 200-day SMA.
If the EUR/USD pair overcomes the resistance zone 1.1587-1.1602 USD, it will target testing the zone 1.1633-1.1640 USD. Upon success, the upward movement will continue at 1.1709-1.1724 USD.
With the Euro falling below the support zone 1.1480-1.1465 USD, it will seek further support in the zone 1.1397-1.1389 USD. In a breakthrough, the downward trend may continue to 1.1358-1.1343 USD.
USD/JPY pair analysis
The USD/JPY pair fell to 107.76 in Asian trading hours as the dollar got hit hard by the US Federal Reserve with multiple participants and later, the Minutes of the December FOMC Meeting offering quite a dovish stance and even opening doors for a rate cut. The pair is now bouncing alongside with European indexes, which opened sharply down and are currently trimming their early losses.
Technical indicators remain within negative levels, the Momentum heading nowhere and the RSI aiming to recover but around 42, indicating a limited upward potential, due to lack of interest in the greenback.
If the USD/JPY pair overcomes the resistance zone 108.67-108.78 JPY, it will target testing the zone 109.34-109.40 JPY. Upon success, the upward trend will continue at 109.70-109.81 JPY.
If the dollar falls below 107.75-107.64 JPY, the next support will be the zone 107.34-107.28 JPY. In a breakthrough, the downward trend may continue to 106.72-106.61 JPY.