Talking Points
- The past 24 hours have produced two key rate decisions out of the US and UK. The Fed hiked rates as was widely-expected but continued to harbor three hikes for this year as the median expectation. This produced a move of USD-weakness that lasted into the European session this morning, at which point a bounce began to show off of the March lows.
- The fact that bulls haven’t been able to show a more definitive response seems to indicate that the general trend of USD-weakness may persist as we move into Q2. Elsewhere, cooperative counterparties in GBP and JPY[1] appear to be showing longer-term setups that could be conducive for a continuation of weakness in the Greenback, and we look in to each of those below in GBP/USD[2] and USD/JPY[3].
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If you’re looking for short-term indicators around the US Dollar, check out our IG Client Sentiment Indicator[6].
Rate Hike Sell-Off in the US Dollar Finds Support at March Lows
Yesterday’s FOMC rate decision was fairly interesting[7] as the bank hiked rates while warning that more tightening was on the way; and yet the US Dollar put in another move of weakness to break back-below the 90.00 level on DXY[8]. While the Dollar caught a bid for the first five minutes after the release of the statement, that strength was quickly faded and the Greenback continued to head lower through Mr. Powell’s first press conference and last night’s Asian session; until a bit of support began to show around the European open. That support came-in around the 89.40 level, which is the same area that constitutes the March low in DXY, and prices have since bounced up to find resistance around a prior area of short-term trend-line support.
FOMC-Fueled Dollar Drop Finds Support at the March Lows (Hourly Chart)
Chart prepared by James Stanley[9]
On a short-term basis, the above setup can keep the door open on both sides of the Greenback; with bulls looking for that overnight support bounce to continue back-up towards the 90.00 level; while bears have resistance at the trend-line combined with sellers showing up at prior support. This stance would be looking for fresh March lows as the US Dollar hasn’t seen much action below 89.40 since mid-February, and as we’ve looked at over the past few days, there are some interesting areas for such a theme such as GBP/USD or USD/JPY[10].
Powell’s First Press Conference
The press conference after yesterday’s rate hike wasn’t just Mr.
