empty
 
 
02.02.2023 04:26 PM
Jerome Powell tried his best to support the dollar, but the market turned out to be stronger

One event that the market has been anticipating for a very long time occurred yesterday evening. The market now only expects a 25 basis point rate hike after the most recent report on US inflation was released. We were certain that the market was accurate last night. It was even correct to retain strong demand for the euro and the pound in recent weeks given that the reduction in the rate hike phase can be seen as "bearish" for the dollar. Jerome Powell, the president of the Federal Reserve, gave a speech in the evening in addition to the rate hike, which I believe was much more significant.

First off, Jerome Powell pointed out that inflation is still at an undesirable level and is still substantially beyond the long-term target. He stated that the Federal Reserve still needs to do a lot of work to regain price stability. Given that inflation is on the decline, it was reasonable to raise the interest rate by 25 basis points. However, numerous additional rate increases may be necessary at the following sessions to fully realize the effects of tightening monetary policy This, in my opinion, is Powell's first crucial utterance, demonstrating that the growth will go without interruption. Let me remind you that at the March meeting, many analysts questioned whether the FOMC was ready to hike the rate.

In several nations across the globe, inflation has recently displayed inconsistent values. For instance, we recently heard that the EU's core inflation rate, which excludes the cost of energy and food, did not go down in January. This could imply that the primary inflation indicators are declining as a result of the recent drop in the price of oil and gas on the global market. Since the United States and the EU are also affected by this issue, a comparable image may be seen there as well. Powell's willingness to keep tightening is reasonable in light of this.

This image is no longer relevant

In light of its underlying indicator, the Fed president stated yesterday that additional evidence of decreasing inflation is required. He added that a protracted time during which the rate would remain at its current level will start when the rate-hike cycle is over. Powell stated at a press conference that "the good news is that inflation is dropping without hurting the job market." As it turned out from Powell's speech, the likelihood of multiple additional interest rate hikes was discussed at the meeting; the possibility of pausing for a bit before resuming tightening was not examined.

Powell, in my opinion, did all possible yesterday to raise interest in US currency. Despite being less harsh than in the past three months, his address was full of "hawkish" comments. However, despite these statements, the dollar did not increase.

I draw the conclusion that the construction of an upward trend section is nearly finished based on the analysis. As a result, sales with targets close to the predicted level of 1.0350, or 261.8% Fibonacci, can now be taken into consideration. The potential for complicating and extending the upward section of the trend remains quite strong, as does the likelihood of this happening. The market will be ready to finish the wave e when a move to break through the 1.1157 level fails.

This image is no longer relevant

The development of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Currently, sales with targets at the level of 1.1508, or 50.0% Fibonacci, might be taken into account. You can set a stop loss order above the peaks of waves e and b. As it does for the euro, the upward section of the trend may still assume a longer form than it does currently. Sales should be handled with caution because the pound tends to increase.

Chin Zhao,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

The ECB is ready to raise the rate, but at a slower pace

European and British currencies have been in great demand in recent weeks. Although there was a lot of news during this period, I am not completely certain that this context

Chin Zhao 18:13 2023-03-29 UTC+2

EUR/USD to shoot up, but not too far

While ECB officials are talking, EURUSD continues to rise. No matter what, about the stability of the eurozone banking system, rate hikes, or even a slowdown in the monetary tightening

Marek Petkovich 17:30 2023-03-29 UTC+2

AUD/USD: Australia's inflation, risk appetite and southern prospects

The release of Australia's February inflation data put pressure on the Australian dollar today. Sellers attempted to pull the price to the bottom of the 66th figure, but they once

Irina Manzenko 17:13 2023-03-29 UTC+2

BlackRock expects Fed to keep rising rates despite banking turmoil

Black Rock Inc. is an international investment company headquartered in New York. It is one of the largest investment firms in the world and the largest in the world

Andrey Shevchenko 15:07 2023-03-29 UTC+2

What will happen to the dollar?

Despite some easing of the banking crisis, the potential for negative economic consequences remains. And it is not yet clear whether bank failures are limited only to SVB and Signature

Irina Yanina 14:03 2023-03-29 UTC+2

GBP/JPY: Sterling finds buyers

On March 28, the pound sterling periodically rolled back against the Japanese yen. But in the end, buyers took over the market. Note that the pair is very sensitive

Irina Yanina 13:30 2023-03-29 UTC+2

Gold's strength will be tested

The lack of news is already good news for the stock market. Shocks from the bankruptcy of three U.S. banks, the Credit Suisse takeover, and the problems of First Republic

Marek Petkovich 13:14 2023-03-29 UTC+2

EUR/USD creeping higher amid growing risk appetite. Game-changer could happen on Friday

EUR/USD has been creeping higher amid growing risk appetite, hawkish remarks from ECB policymakers, and dovish expectations of the Fed's further policy moves. This fundamental background enables the euro bulls

Irina Manzenko 12:02 2023-03-29 UTC+2

GBP/USD. Overview for March 29. Rumors around the Fed rate have a negative impact on the dollar

The GBP/USD currency pair continued its slight upward movement on Tuesday, having earlier bounced off the moving average line. Therefore, from a technical standpoint, we have every justification for continuing

Paolo Greco 11:33 2023-03-29 UTC+2

EUR/USD. Overview for March 29, 2023

On Tuesday, the EUR/USD currency pair maintained its upward trend. It's time to take a new look at both of these events after talking about the "swing" and the irrationality

Paolo Greco 11:19 2023-03-29 UTC+2
Can't speak right now?
Ask your question in the chat.