Bulls again face strong headwinds from 110 barrier after Fed chief Powell’s speech
The dollar pulls back from session high at 109.94 on Fed chief Powell’s remarks as fresh upside attempts stalled on approach to psychological 110 barrier which repeatedly capped attacks last week.
Fed Chairman Powell in his testimony pointed moderate economic growth and that the US economy remains resilient to global problems.
Powell was also optimistic on inflation outlook, expecting consumer price to rise closer to 2% target, while current monetary policy will remain appropriate, however, the central bank would respond accordingly if conditions change.
Coronavirus story is conflicting positive outlook and the Fed is going to closely monitor developments as worsening situation in China would spill over and hurt strongly the global economy.
Traders reacted cautiously on Powell’s comments and dollar bulls reduced pace, with technical signals warning of renewed attempts towards pivotal 20DMA support (109.52) which contained pullback on Fri/Mon.
Bearish divergence on daily stochastic as the indicator is about to emerge from overbought territory, is negative signal, partially reinforced by flat RSI and momentum.
Close below 20DMA would shift near-term focus lower and expose next pivotal support at 109.36 (Fibo 38.2% of 108.31/110.02 / 10DMA) break of which would generate reversal signal.
Extended sideways mode could be expected while the price action remains between 20DMA and 110 barrier, which produced strong headwinds and eventual break here would bring bulls fully in play for extension towards barriers at 110.29 (17 Jan high) and 110.52 (Fibo 76.4% of 112.40/104.44 fall).
Res: 109.94; 110.02; 110.29; 110.52
Sup: 109.73; 109.61; 109.52; 109.36