Market Spotlight: USD Slips As Powell Says .5% March Hike Not Certain
USD Softens Following Further Powell Comments
Following the strong buying we saw in USD on Tuesday, the Dollar was seen softening yesterday as the second half of Powell’s testimony failed to ignite a further rally. On Tuesday Powell warned that the Fed was looking at having to raise rates above current projections, in terms of both pace and scale, in response to the unexpected resilience seen in the US economy. Those comments fuelled a sharp uptick in USD buying and US yields, which dragged risk assets lower across the board. Pricing for the March FOMC switched to 75%/25% in favour of a larger .5% hike, a complete reversal of the pricing ahead of those comments.
Powell Pushes Back Against Bigger Hike
However, in subsequent comments made yesterday, Powell was seen diluting Tuesday’s hawkish sentiment a little. The Fed chair was keen to state that a larger hike in March was not a done deal and that upcoming data ahead of the meeting would have a big part to play in the decision. With February labour market data due tomorrow and February CPI due next week, there is still the risk that a drop back in both or either reading might see the Fed stick to a smaller .25%. This fresh uncertainty has been reflected in a weaker USD so far today. However, looking ahead to tomorrow’s data, should we see further strength in the US jobs picture this should drive USD higher once again.
Technical Views
AUDUSD
The sell off in AUDUSD has seen the pair breaking down through the rising channel off last year’s lows and through several key support levels. Price has recently broken down below the .6681 level and is now fast approaching a test of the .6535 level. While the sell off has paused for now, with retail traders still heavily long and with momentum studies bearish, focus is on a continuation lower with .6271 the bigger target below .6535.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.