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- The US dollar index falls as investors prefer riskier assets after Powell’s dovish speech.
- Powell noted that the economic outlook is close to the Fed’s target.
- Markets have already priced in the cut in September.
US Dollar (USD), measured in US Dollar Index The US Dollar Index (DXY) resumed its decline on Friday, falling below the 101.00 level due to a shift towards riskier investments. This shift was influenced by the dovish tone adopted by the US Federal Reserve. Federal Reserve Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole.
Despite concerns about slowing job growth, Fed officials, including Powell, maintain a positive view of the U.S. labor market. Data suggests the U.S. economy continues to expand above trend, suggesting the market may be overestimating the need for rapid monetary easing.
Daily Market Movers Summary: US Dollar Falls After Powell Speech
- Federal Reserve Chairman Powell explained that inflation has fallen significantly, bringing the economy closer to the Fed’s 2% target.
- Powell noted a marked slowdown in the labor market, suggesting the economy is no longer overheating.
- The Fed chairman also noted that the balance of risks has shifted, with inflation risks lower but employment concerns rising.
- Fed Chairman Powell explained that future interest rate cuts will be determined based on economic data, expectations and the balance of risks.
- Market participants increased their bets on a Fed rate cut in response to Powell’s comments, with a September rate cut now fully priced in.
US Dollar Index Technical Outlook: Bearish Bias Becomes More Pronounced, Correction Possible
The technical outlook for the DXY remains bearish. However, buyers are trying to start an uptrend. The index remains below its 20, 100 and 200-day simple moving averages, indicating a bearish bias. The Relative Strength Index (RSI) is below 30, indicating continued excessive selling pressure. The Moving Average Convergence Divergence (MACD) remains in a negative zone with red bars.
However, since the indicators are showing oversold signals, there is a possibility of an upward correction.
Support levels: 101.00, 100.50, 100.30
Resistance levels: 101.50, 101.80, 102.20.
