Dollar On the Rise after Powell's Rate Warning

FXOpen

The dollar strengthened after Federal Reserve Chairman Jerome Powell said Fed policymakers were not confident interest rates were still high enough to end the battle against inflation. Despite progress in inflation, he is still unsure whether the US central bank will have to raise interest rates to get the job done. However, analysts note that the regulator is unlikely to rush into a new tightening of monetary policy, fearing a sharp slowdown in the American economy and overheating in the labour market. At the same time, data on the dynamics of applications for unemployment benefits reflected a decrease in the indicator for the week of November 3 from 220.0k to 217.0k, slightly lower than forecasts of 218.0k, and the number of repeated applications for the week of October 27 increased from 1.812 million to 1.834 million with expectations of an increase to 1.820 million. The focus of investors today will be on the consumer confidence index statistics from the University of Michigan for October: it is expected that the indicator will be adjusted from 63.8 points to 63.7 points. The dollar index was up 0.35% on the final day at 105.86.

EUR/USD

Today, EUR/USD is showing near-zero dynamics, holding near the 1.0665 mark. The nearest resistance can be seen at 1.0679, a breakout to the upside could trigger a rise towards 1.0732. On the downside, immediate support is seen at 1.0650, a break below could take the pair towards 1.0639.

The euro fell against the dollar on Thursday after ECB officials reduced the likelihood of a rate cut. ECB policymakers on Wednesday said further progress was needed to curb inflation, and Vice President Luis de Guindos said in an interview on Thursday that it was premature to discuss European Central Bank rate cuts as there were still some risks to the inflation outlook, especially core inflation prices. In addition, today there will be a speech by the head of the ECB, Christine Lagarde, who may reveal her department’s plans for further monetary policy in the region.

At the lows of the week, a new downward channel has formed. Now the price is in the middle of the channel and may continue to decline.

GBP/USD

The GBP/USD pair is holding near the local lows of November 3 and 1.2225. The nearest resistance can be seen at 1.2232, a breakout to the upside could trigger a rise to 1.2260. In the fall, the nearest support is seen at 1.2153, a break below could take the pair to 1.2108.

The pound weakened against the dollar after Bank of England (BoE) officials, including chief economist Huw Pill, confirmed policy should remain restrictive for some time. Earlier this week, Pill said market prices pointing to the first interest rate cut in August 2024 does not seem entirely unreasonable. But Bank of England Governor Andrew Bailey confirmed on Wednesday that monetary policy would have to remain contractionary for an extended period. Traders are weighing data from the UK today. Thus, statistics on GDP for the third quarter turned out to be multidirectional: on a monthly basis the figure increased from 0.1% to 0.2%, and on a quarterly basis it adjusted from 0.2% to 0.0%, while in annual terms dynamics remained at 0.6%.

At the lows of the week, a new downward channel has formed. Now the price is near the upper border of the channel, from where it can continue to decline.

USD/JPY

The USD/JPY pair is showing flat trading, holding close to the 151.35 mark and the local highs of the beginning of the month. Strong resistance can be seen at 150.41, a break higher could trigger a rise towards 150.72. On the downside, immediate support is seen at 150.41. A break below could take the pair towards 150.82.

The American currency managed to recover after the losses of last week and again gain a foothold confidently above the next psychological level of 151.00. Trading participants moderated their expectations regarding possible currency intervention by the Bank of Japan, but still allow for the development of such a scenario. Macroeconomic statistics from Japan published the day before did not have a noticeable impact on the dynamics of the instrument. Thus, the volume of bank lending in October adjusted from 2.9% to 2.8%, which coincided with analysts’ forecasts, the current situation index from Eco Watchers decreased from 49.9 points to 49.5 points, while experts expected 50. 1 point, and the forecast for developments - from 49.5 points to 48.4 points.

At the highs of the week, a new ascending channel has formed. Growth may continue after the price approaches the lower border of the channel.

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