The USD Index is edging higher once more, ahead of Tuesday’s testimony by Fed Chair Jerome Powell before the US House Select Subcommittee on the Coronavirus Crisis.
Following four solid gains on the USD Index as a result of the hawkish stance the Fed assumed after its rate decision on Wednesday, the DXY could find itself in the spotlight once more as lawmakers grill the Fed Chief about the endgame of the Fed’s emergency lending programs. Some members of the Fed’s governing council have made several hawkish statements since the decision of Wednesday. A few hours ago, LiveSquawk had tweeted a few comments from Powell, who acknowledged that inflation had indeed risen in recent months but would come back to the Fed’s 2% projection.
Traders would be looking out for any statements from Powell indicating attempts to push back on the interpretations of the Fed’s statement as being hawkish. With the USD Index now at a critical resistance, this would make for an exciting session later Tuesday. The DXY is up 0.15% as of the time of writing.
Technical Outlook for USD Index
The DXY is testing the resistance at 92.00 (psychological), following yesterday’s slight dip. If the Fed Chief pushes back on the hawkish sentiment, we could see a decline from this point, targeting the 91.50 support initially. A further decline targets 91.26 and 90.96, in that order.
On the flip side, if the Fed Chief doubles down on last week’s hawkish stance, we could see the USD Index break the 92.00 psychological resistance, with a push towards 92.50 initially. Additional targets at 92.80 and 93.17 may also come into the picture if the bullish market response is strong.