Fresh bears after dovish Powell test key supports
The dollar index fell further after starting trading on Thursday with slight gap lower after losing 0.44% on Wednesday.
The greenback was hurt by dovish tone of Fed Chairman Powell’s testimony to Congress, as he pointed to global growth slowdown and persisting trade conflict with China that could have further negative impact on the US economy.
Market fears about more aggressive rate cut rose after Powell’s comments, with expectations for 0.5% cut being back to play.
Adding to negative signals were minutes of FOMC’s last meeting as many of policymakers support scenario for more stimulus.
Pullback from three-week high at 97.18 generated initial bearish signal on formation of bearish outside day.
Extended dip found footstep at strong supports at 96.48/46 zone (Fibo 38.2% of 95.35/97.18 / 200DMA), keeping bears on hold in early European session trading on Thursday, as pressure from negative sentiment and bearish signals from south-heading stochastic and completion of bearish engulfing pattern were so far offset by rising bullish momentum and strong supports (Fibo / 200DMA), with thinning daily cloud, which will twist on Tuesday, also seen as magnetic.
If fresh bears manage to clearly break 96.48/46 pivots, acceleration towards 96 zone could be expected, with break here to risk extension towards next strong support at 95.75 (top of rising thick weekly cloud).
Conversely, failure to break 200DMA support may push the price higher, with return above 96.80 (100DMA) needed to signal an end corrective pullback from 97.18.
Res: 96.64; 96.80; 97.05; 96.98
Sup: 96.46; 96.37; 96.26; 96.05