Yesterday, in a streamed interview, Fed Chair Jerome Powell, about rate hikes, told the Wall Street Journal, "If that involves moving past broadly understood levels of neutral, we won't hesitate to do that…until…we see inflation coming down." The Fed is set on fighting inflation first and foremost, given the US's robust labour market. It gives the Fed a cushion to pursue its tightening policy, with Powell saying, "You'd still have a strong labour market if unemployment were to move up a few ticks." Nevertheless, the Fed Chair did concede that "there could be some pain involved to restoring price stability."
In response, FXCM's dollar basket, the USDOLLAR, has found support. Consider:
The daily USDOLLAR chart on the left has normalised its overbought condition (green rectangle). The hourly chart on the right, which has pulled back 50% of its previous impulse move up, turned bullish in response. Both its trend-following indicators and stochastic have crossed positively, as the greenback found support. If the stochastic moves above 80 and holds there (blue arrow), the bullish momentum will be building. This may push the daily chart back into its bullish zone, between the upper blue and red bands, as the market considers how much above neutral is still to be priced.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.