Market Analysis

U.S Dollar falters as ‘insurance cut’ remains on the cards

The U.S Dollar Index continues to move lower as financial markets once again started to price-in a series of ‘insurance cuts’ from the Federal Reserve, following the conclusion of Federal Reserve Chair Jerome Powell’s two-day semi-annual testimony. The overwhelmingly bearish FOMC meeting minutes and a host of dovish Federal Reserve speakers also helped to push the greenback lower against a basket of top currencies.

In the final day of Federal Reserve Chair Powell’s testimony before the Senate Banking Committee, Chair Powell provided market participants with his precise view on the U.S economy, leaving investors in no doubt that the U.S central bank is still very concerned about below trend inflationary pressures in the United States economy and the cross-currents coming from the ongoing global economic slowdown.

Aside from the Federal Reserve’s dovish outlook, the other key points from the two-day hearing uncovered that U.S lawmakers remained concerned about President Trump’s hold over the Federal Reserve and the detrimental effects that Facebook’s new digital currency, Libra, may have on the economy and the U.S Dollar.

However, Chair Powell remained steadfast in his concern for the potential adaption of a universal cryptocurrency, such as Libra. Chair Powell agreed with U.S Congress that it could undermine the stability of the financial system and also the U.S Dollar. It is noteworthy that Bitcoin and the broader cryptocurrency market tumbled sharply lower after bearish comments about the risks of Facebook’s foray into the digital currency space.

Chair Powell noted that the Federal Reserve is still monitoring a variety of top-tier data releases before the upcoming rate decision at the end of the month, which includes U.S jobs, inflation, and retail sales numbers. Unless these key releases dramatically overshoot the FED’s expectations, a twenty-five basis point rate cut is all but a certain at the end of this month.


USD/CHF Candlestick Chart | Source: ActivTrader 


The USD/CHF pair has made recovery back towards its 200-day moving, following better than expected CPI inflation figures from the U.S economy on Thursday. Technically, a bearish head and shoulders pattern is present on the daily time frame, with neckline support around the 0.9714 level. Key intraday resistance for the USD/CHF pair is currently found at the 0.9910 and 0.9950 levels, while near-term support is now located at the 0.9840 and 0.9780 levels.


Written by Nathan Batchelor, External Analyst, ActivTrades

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided.