The US Dollar Volatility Index or the USD (Ticker: DXY) is seeing additional volatility this afternoon as Fed Chair Jerome Powell makes remarks at the Peterson Institute for International Economics on the state of the US economy. While he has ruled out the use of negative interest rates by the Fed, he has opened the door for further action by the Fed to stimulate the US economy faster.
Here are some notable quotes:
“Scope and speed of downturn ‘without precedent’.”
“Many companies facing liquidity problems, and that is something the Fed can address.”
“May take even a few more months for economic recovery to take shape.”
“Slower recovery means the Fed may have to do more.”
“Additional policy measures may be needed to avoid lasting damage to the economy.”
“Fed will continue to use tools ‘to their fullest’ until the crisis has passed, recovery well underway”.
Powell reiterated the Fed’s stance on negative rates by saying that the “previous minutes on negative rates debate says all FOMC participants were against them,” in response to a question posed to him during the event.
The USD Index – USD (Ticker: DXY) is presently trending upwards on Powell’s comments, albeit with some choppy trading.
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Technical Outlook: USD (Ticker: DXY)
The USD Index has bounced from intraday lows and is now trading at 99.88. The price action remains confined within the borders of the triangle on the daily chart.
A breakout from the triangle will need confirmation in the form of a 3% penetration on the weekly chart, or two penetration closing prices from two successive daily candles that are found above the triangle’s upper border. This will place the USD Index on the path towards the initial upside target at 100.93. The fundamental basis for this move may come from further stimulus by the Fed. Continued advance takes the USD Index towards the 101.82 resistance.
On the flip side, a breakdown of the lower triangle border opens the door for a retest of the 99.42 support level. Further declines will bring 98.60 and 98.19 into focus, and could also breakdown the 200-EMA dynamic support. 97.16 remains a viable support as well, as it is the site of a previous double bottom on 18 Oct/4 Nov 2019.