Recent Price Behaviour
The USD bears are in full control as the US Dollar Index plummets to the lowest levels in almost two months, allowing its peers to flourish. Last week was another one in the red for the USD, marking it the third consecutive now. The greenback’s downside pressure has picked up some pace given the bearish flag/ascending channel structure breach.
Things had been looking so promising for the USD bulls, after producing the best quarterly performance since June 2018 for Q1 of this year. As per the last article, it does convincingly appear that the bull run is well and truly over.
Why the drastic shift in sentiment for USD?
Markets are focusing at the moment on the still very dovish tone of the Fed that seemed to ignore the rapidly improving outlook for the US economy. There have been repeated assurances from Fed officials that they will keep interest rates low have helped stabilize U.S. bonds, especially at the short end of the market.
The comments from various members of the U.S. central bank have been enough to turn off the USD bulls. Market players will again likely be keeping in mind the potential for greater monetary policy divergence. The FOMC making it clear they will be sticking to their current path of stimulus and low rates, where other major central banks are perhaps closer to scaling back some of their own actions.
FOMC rate decision in focus
No changes in policy expected at this meeting, expecting them to echo the same tone of late, Chair Powell and the FOMC should give a more positive view of the economy likely to reiterate that the economy still needs to make some further progress before looking at signalling any potential policy changes and risks remain from the virus.
Technical observations
As shown in the video breakdown, price action via the monthly candle at present is ever pushing for that technical bearish engulfing of March’s closure. Previously detailed, there was a critical support level at 91.50, in proximity to the lower acting trend line as part of the marked bearish flag pattern, which has been breached.
Last week’s candle closure saw the USD index firmly closing outside of the noted flag/ascending channel pattern. It has left the door wide open for the likes of EUR, GBP, AUD, NZD, CAD to all gain some further ground against the greenback.