DOLLAR EDGES HIGHER AS POWELL RAISES PROSPECTS FOR MORE HIKES

The dollar continued its upward moves against the major currencies after Jerome Powell’s statement where he forecasted four more hikes this year. This was a higher number than traders had expected. Today, the index gained by more than 20 basis points to trade above the 90.50 level.

The pound was among the biggest loser today, falling by more than a percentage point against the Japanese Yen, and almost 90 basis points against the dollar. The pound fell as the EU published a plan to keep the North Ireland region in the single markets and customs union after Brexit. The new move by the EU is detested in the UK, with Prime Minister May saying she would not sign a law that would indirectly annex a part of the country.

In the European Union, Germany’s unemployment ‘change’ improved better than expected while the unemployment ‘rate’ remained unchanged at 5.4%. At the same time, inflation for the region remained unchanged. The Core CPI data showed that inflation remained stagnant at 1.0% while the YoY CPI stood at 1.0%.

In the United States, data from the commerce department showed that the country’s economy grew at a slower pace than expected. The data showed that the last quarter’s GDP grew at 2.5%, which is slightly lower than the 2.6% analysts had expected.

EUR/USD

The EUR/USD pair continued the downward trend following Powell’s statement yesterday, crossing all the support areas we had predicted. As shown below, the pair is currently trading at 1.2209, which is the lowest level since February, 09. This level provides an important support. The GDP numbers reported today could change the downward trend, which could see the pair go back to 1.2355. The alternative scenario is where the pair reaches the 1.2162 level.

GBP/USD

The cable fell as the EU published a new document on Northern Ireland. The pair fell to 1.3815, which is the lowest level since February, 14. Brexit complications, coupled with a strengthening dollar could not rescue the pair. Going forward, this pair will continue to be a volatile one, and one that traders should take a lot of caution on. As shown below, the pair has been trading on a head and shoulder pattern, which could make the current fall an ideal entry position for traders long on the pound.

GBP/JPY

This month, the pair has lost more than 3.45%, falling from a high of 156.03 to the current low of 148.02. Today, the pair has lost by almost a percentage point following the happenings relating to Brexit. The pair is currently trading at the lowest level since November. In the short term, the pair could try to recover some of the lost gains, with the ideal price target being 149.74.