Dovish comment from Fed’s Powell, USD sinks

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USD sinking, as Stocks soaring on dovish comment from FED chairman Jerome Powel, followed by Trump’s criticism of an imminent rate hike

  • The recent statement from FED chairman, Jerome Power indicated a fundamental shift for the US monetary policy, as US sinks followed by the comment.
  • Before the speech, the implied probability of a rate hike was 0.79%, and it slides also as the FED chairman mentioned about a near-neutral inflation rate.

USD has been dragged down under deep water, as almost of all of the major currencies are raising against it, and stocks have started to surge. On Wednesday, after Federal Reserve Chairman, Jerome Powel delivered a dovish speech regarding the monetary policy, USD starts to sink and further downfall is likely. USD was being traded around 96.92 and just after the press briefing, it had experienced a nosedive below 96.46 and it is still sinking residing at 96.19. In the speech, the FED chairman spoke that there had been remarkable development in the US economy and the core strength of its financial health is bolstering, as the economy is expecting solid US growth. However, the part that soured the USD bull-run, was his finding about the financial stability and inflation, as he was mentioned that the US economy has reached a near-target inflation. Yet, knowing that this comment could bring catastrophic impact over the currency, he alerted the audiences that there is difference between monetary policy and the financial decision and, he also mentioned that the FED was just evaluating the financial health, yet the USD sunk anyway.

USD hourly chart

USD hourly chart

As an aftermath of the press briefing, almost all of the major currencies including GBP and EUR surged. GBP has experience over 100 pips gain in just a couple of hours and EUR was experiencing almost the same with 92 pips gain. While this report was being written, the GBP has been residing just over 1.2830 and the EUR has been traded around 1.1370 region and further bull-runs are expected, as there has been a bullish bias created in the market, having gold experiencing a tremendous run, reigning over 1221.58, though it appeared to fail a retest of 1230 region.

In the face of USD nosedive, the stocks have gained momentum, as both tech stocks and industrial stocks have been experiencing a smooth run, perhaps their best run in the last three weeks, as souring tech stocks had been out of their league in the last couple of weeks and dragging the whole market downwards.

Bottom Line

As FED chairman Jerome Powel has set up a dovish bias over USD, a bearish trend is likely to persist for the rest of the week and USD’s key support resides at 95.60, while a downward move below, would open up the opportune moment to test the 94.30 region (the two-monthly low). Additionally, the BoE warned of Brexit recession potential, which might alter the course of GBP and a GBP and EUR bull-run might have been on their way. AUD and NZD also experienced monumental gains over the dovish Powel comment, as AUD has been residing at 0.7320 and NZD is reigning just below the its key resistance at 0.6900.

Read more on EUR/USD here

[Disclaimer: The content of this article is personal opinion and should not be considered as investment advice or suggestion towards any trading activity.]

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