The US Dollar is being offered across the board, as the FOMC Chairman Jerome Powell, has announced a new inflation targeting strategy. This new inflation targeting mechanism will see the Fed continuing to use 2% as its targeted level. Still, the Fed would be prepared to target moderate shifts above or lower this level according to the state of the economy. Chairman Powell’s prepared remarks were delivered at the virtual Jackson Hole Economic Policy Symposium a few minutes ago.
According to Jerome Powell, the Fed would seek to achieve an inflation target that averages 2% over time without tying itself to a particular average-defining mathematical formula. In his words, “our approach could be viewed as a flexible form of average inflation targeting”. He also rounded off the speech by saying:
“we will steadfastly seek to achieve a 2% inflation rate over time.”
“we plan to undertake a thorough public review of our monetary policy strategy, tools, and communication practices roughly every five years.”
According to the FOMC Chief, the review is the culmination of consultations with stakeholders since early 2019, and future reviews are to be conducted every five years. These comments have generated some very choppy trading on the US Dollar Index, with the DXY currently trading 0.28% higher at 93.06.
Technical Outlook for USD Index
Trading on the US Dollar index has produced some very choppy patterns in the last hour. The daily candle has found a range that stretches from the 93.17 resistance to the 92.50 support level. In the last few minutes before the publishing of this post, the DXY has started to gain bullish traction. However, any further upside moves on the DXY requires a breakout from the channel’s upper border. This position would permit the DXY to aim for the 93.80 resistance, with 94.62 and 95.19 being the immediate targets to the north of this level.
On the flip side, a breakdown of 92.50 is required for the USD Index to track towards the lower channel border. The 91.91 support stands in the way of this move and needs to give way for price to head towards the 90.97 support target.