It might be a big day for traders and big decision for Federal Reserve Chair Jerome Powell who will have to decide which message he conveys. Even if the delta variant creates further uncertainty, the Fed must decide whether the costs of extending the commitment to maximum stimulus have come to outweigh the benefits. The risk of bubbles and financial instability is growing, so it makes sense to phase out quantitative easing. This would be positive for the U.S. dollar which could climb to fresh highs on such confirmation. In the opposite case, if the Fed delays plans to taper its bond purchases as expected, we could see a sell-off in the greenback, pushing other counterparts higher in turn.
Powell’s highly awaited symposium speech is scheduled for today at 14:00 GMT.
Going into today’s event, chances are slightly in favor of the dollar this morning.
The pair marked a short-term resistance at around 1.1775. Above 1.1780, we see a next target at 1.1815. Breaking above 1.1860 could see a test of 1.1890 and possibly even a run for 1.1940. Dollar bulls will wait for a renewed break below 1.1725 and more importantly below 1.17 in order to push the pair lower towards the crucial 1.16-support.
The pair rebounded and as long as it holds stable above 1.3650-10, we pencil in higher targets at 1.3830 and 1.39. An upside break of 1.3910 could spur bullish action towards 1.40. Breaking, however, significantly below 1.36 could pave the way for a sell-off towards 1.34.
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