US dollar destined to a 38.2% Fibo and support structure
- DXY on the verge of a touch of the daily 38.2% Fibo as Fed back peddles.
- Fed speakers have toned down the hawkish rhetoric which is weighing on the greenback.
At the time of writing, DXY is trading flat on the day and is consolidating the latest moves since the Federal Reserve surprised markets last week with a hawkish hold.
DXY has suffered as a consequence of Fed speakers toning down the hawkish rhetoric and the likelihood of higher interest rates.
Fed Chair, Jerome Powell, said that a debate on tapering may be on the cards, but they are nowhere near to raising rates.
Powell also said it is difficult to know how long some of the transitory impacts on inflation will last but he anticipates that it should be through it in a year’s time.
The above was reiterated by colleagues such as Cleveland Fed President, Loretta Mester, who said that now is not the time to end accommodative policies and that it is important communications do not add to market volatility.
New York Fed President, John Williams, argued that there is a long way to go to full employment and a rate rise is a “way off”, expecting that inflation will fall back to 2.0% next year.
Then, we also heard from San Francisco Fed President, Mary Daly. She explained that the conditions for tapering may be met later this year or early next year.
Powell has maintained that the Fed intends to keep up its unprecedented monetary support until the job market returns to normal, so the focus will be on economic data from here on.
Meanwhile, Wall Street ticked upward on Tuesday as a result which has helped the US dollar bears out.
DXY technical analysis
The 38.2% Fibo comes in at 91.60 and would be expected to hold and potentially encourage bulls back in for an upside target at the early April structure located at 92.83.