Powell helps bring dollar strength for EUR/USD, GBP/USD and USD/JPY
Dollar showing signs of strength within EUR/USD, GBP/USD and USD/JPY, but the Powell bounce could prove fleeting if Omicron sparks fresh lockdowns.
EUR/USD struggling to break through $1.1374 resistance
EUR/USD has been on the rise of late, with shifting expectations around the Federal Reserve Bank (Fed) monetary policy proving key to sentiment in the days since the arrival of the Covid-19 Omicron variant.
While Powell touted a somewhat dovish line on Monday, yesterday saw him pivot towards a more hawkish message of a potential ramp-up in tapering. This is helping to reverse the pair from the $1.1374 swing high, which is being respected once again this morning.
A break back up through that level would bring greater confidence of a bullish continuation of the recent recovery phase. However, until that happens there is a chance, we see the price start to reverse lower in line with the long-term bearish trend in place.
GBP/USD turning lower from trendline and Fibonacci resistance
Today sees an appearance from BoE Governor Bailey, thus providing the basis for the pair volatility. The chart highlights how the price has rally up into a confluence of resistance today, with the descending trendline and 76.4% Fibonacci bringing a potential turning point for the pair. As such, a bearish outlook holds here, with a rise through $1.337 required to negate that outlook.
USD/JPY turning higher after Powell comments
USD/JPY is another pair that has been driven by the shift in outlook for US interest rates, with the pair reversing into a seven-week low on Tuesday.
However, Powell’s more hawkish tone yesterday brought about some stability around the key ¥112.72 support level. With the price moving higher, a break-up through the ¥113.96 resistance level would bring greater confidence of a protracted move higher.
As with EUR/USD, the risk here is that Powell’s hawkish intent may count for little in the event that this latest variant sparks a fresh economic contraction. Such a move would likely send USD/JPY lower, with a break below ¥112.53 bringing greater confidence in a fresh downside move.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets