Powell Focuses on Trade Tensions and Global Growth
Fed Chair Powell’s testimony shed some light on the central bank’s stance on US monetary policy. The dollar had already turned lower ahead of it and gained some downside momentum during.
The Fed Chairman focused on ongoing trade tensions and emphasized weak growth globally. When asked if last week’s US jobs report altered his view on easing later this month, he responded that it did not. He further explained that “uncertainties in global growth and trade continue to weigh on the outlook. In addition, inflation continues to be muted, and those things are still in place”.
Powell also communicated that the Fed will continue to monitor data going into their July meeting in assessing whether it is appropriate to ease monetary policy at that time.
From now until the July 31st meeting, some of the data releases that stand out include Retail Sales and the first reading of second-quarter GDP. Later today, inflation data will be released which will be quite important.
Powell will testify for a second day and will begin shortly after the inflation data is reported.
EUR/USD has rallied above some major resistance. Namely, the 50 and 100-day moving averages. However, I think a daily close above these moving averages will tend to carry more weight.
There is a lot going for bulls here. On a 4-hour chart, the pair has broken out from a declining trend channel. It has also regained the 200 moving average and has breached above a horizontal level at 1.1265. This level is now seen as the first level of support for the session ahead.
The target to the upside falls at 1.1305. It will be considered significant resistance considering the 100 moving average on a 4-hour chart is there to create a confluence. And, because of the psychological properties of the 1.1300 handle.
- The momentum in EUR/USD has shifted upward following Powell’s testimony
- The next upside target falls at 1.1300/1.1305.
- Support is seen at 1.1265. If the level breaks, further support is found at 1.1237
- A daily close near or higher from the current price confirms a break of the 50 and 100-day moving averages.