Opposed to Powell’s last speech, his speech today was without a doubt dovish in tone. This had caused the Dollar to go from consolidating to being down -0.50% for the day.
Although the interest rate will stay at <0.25% as it has been for the past year, the Federal Reserve’s worries for the economy continue to grow. Powell noted that the economy needed a “substantial amount of progress” to hit its 2% inflation target. Employment numbers also need to improve before the Fed starts pulling back on bond purchases.
After spending the last few days in a consolidation, the Dollar has chosen a direction. Traders can now comfortably explore shorts for the Dollar and long for majors like EURUSD and GBPUSD. It would be best for traders to wait for the price to clear respective lower highs on the majors, before jumping into longs.
Today’s news has provided traders with the volatility they were seeking. Powell’s comments may also be attributed to a looming lockdown as cases climb once again in the United States. In turn, further Dollar weakness in the coming quarter may also be a theme.
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- Read yesterday’s breakdown: Bearish US Sales Data, Dollar in a Limbo