USDOLLAR short-term analysis points to upwards bias

  • USDOLLAR
    (${instrument.percentChange}%)

In yesterday's testimony before the House Financial Service Committee on Capitol Hill, Fed Chair Jerome Powell suggested a 25bps hike on 16 March. This increase comes as the financial market reel following Russia's invasion of Ukraine. Mr. Powell said that "[i]t's too soon to say for sure, but for now...we will proceed carefully along the lines of [the] plan" proposed before the Ukraine invasion (barrons.com). Inflation is at levels that necessitate the central bank intervention as per its price stability mandate. Moreover, the Fed chair suggested that the US economy is strong enough to withstand higher rates and that the labour market remains robust. This stance steadied Treasury yields and reflected in the greenback.

The left chart below shows the daily heikin ashi (HA) for FXCM's dollar basket, USDOLLAR. The HA is a trend following indicator and is blue, indicating an up-trending bias. In addition, the HA position is in the USDOLLAR's bullish zone, between the upper blue and upper red bands. The chart on the right is the hourly timeframe for USDOLLAR. The trend-following EMAs have crossed bullishly, and the stochastic has turned up (black ellipses). If it moves into the 80+ areas (blue arrow) and holds, an underlying bullish momentum will be developing. The longer the stochastic can maintain its upper quintile, the greater the likelihood of further greenback appreciation. This sign of strength will confirm if the hourly EMAs develop angle and separation.

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Russell Shor

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.

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