USD Continues To Weaken On Powell’s Comments

Jun 23 21, 10:44 GMT

The USD continued to weaken against most of its counterparts yesterday, as Fed policymakers not excluding the Fed’s Chairman Jerome Powell reassured the markets that an actual tightening of the Fed’s monetary policy is still a long way off. Powell as well as New York Fed President Williams stated that the recovery of the US economy necessitates more time before the bank actually tapers its QE program raises its rates. The Fed’s Chairman has reportedly stated that “We will not raise interest rates pre-emptively because we fear the possible onset of inflation,” yesterday at a testimony before a U.S. House of Representatives panel “We will wait for evidence of actual inflation or other imbalances.“ Today we expect June’s preliminary PMI releases to gain attention on the traders side and could affect a number of currencies. The USD Index dropped yesterday yet bounced and managed to remain above the 91.75 (S1) support line. We tend to keep a bearish outlook for the index given that a downward trendline seems to be forming and we intend to keep it as long as the index’s price action remains below it. Should the selling interest for the USD be extended, we may see the index breaking the 91.75 (S1) support line and aim for the 91.30 (S2) support level. Should the index find extensive buying orders along its path, we may see it aiming if not breaching the 92.30 (R1) resistance line which capped the index’s upward movement on the 21st of June.

The Loonie gains as oil prices remain high

The Loonie strengthened for a second day in a row against the weaker greenback, however also against EUR, GBP and JPY, as investor sentiment strengthened benefitting the commodity currency. Also, high oil prices tended to support the Canadian currency as oil remains one of the main export products of Canada. It should be noted though that oil prices tend to hesitate to rise even further, given that OPEC is considering the possibility of further easing of oil production cuts from August onwards. Today Canada’s retail sales rates for April are due out today and could catch trader’s attention and could weaken the Looney if they decelerate. USD/CAD dropped yesterday testing the 1.2320 (S1) support line. We tend to maintain a bearish outlook for the index as long as it remains below the downward trendline incepted since the 21st of June. Please note though that the RSI indicator below our 4-hour chart is near the reading of 50, implying a rather indecisive market. Should the bears actually maintain control over the pair’s direction, we may see the pair breaking the 1.2320 (S1) support line and aim for the 1.2230 (S2) level. Should the bulls manage to take over, we may see USD/CAD aiming if not breaking the 1.2400 (R1) resistance line, which reversed the pair’s upward movement on the 22nd of June.

Other economic highlights today and the following Asian session:

Today we highlight the release of June’s preliminary PMI figures for France, Germany, the Eurozone, UK and the US, with the last being in the American session. Also, at the beginning of the American session, we get from the Czech Republic CNB’s interest rate decision and the bank is expected to hike its two week repo rate by 25 basis points. Should the bank actually hike rates, we may see the Krona getting some support, yet the recent deceleration of the inflation rate could allow the bank to remain on hold, in which case the Krona could weaken. From Canada we get retail sales growth rate for April in the American session, while later oil traders may be more interested in the EIA weekly crude oil inventories figure. Also please note that ECB Vice President Luis De Guindos, Federal Reserve Board Governor Bowman, Atlanta Fed President Bostic and Boston Fed President Rosengren are scheduled to speak.

USD Index H4 Chart