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Greenback Spikes As Chair Powell Fails To Rule Out Larger Hikes

FOREX
  • After some initial two-way price action following the release of the January FOMC decision/statement, broad dollar indices spiked as Chair Powell failed to rule out the potential for larger rate hikes going forward.
  • The dollar index (DXY) has risen to the best levels in over a month, printing above 96.50 and hugging close to the highs approaching the close.
  • The greenback strength was broad based with EUR, AUD, NZD, CAD, CHF and JPY all falling between 0.4-0.65%, reflecting the sharp adjustment higher in front-end US yields.
  • Further weakness in global benchmarks may weigh on risk related currencies such as the Aussie. AUDUSD’s recent failure to remain above the 50-day EMA and the subsequent sharp sell-off strengthens the case for bears and signals potential for a deeper pullback.
  • EURUSD makes fresh year-to-date lows, retreating below 1.1250 and narrowing the gap to the next technical point of note at 1.1222, the Dec 15 low. More significant support comes in at 1186/85 - Low Nov 24 / Low Jul 1, 2020 and the bear trigger.
  • New Zealand CPI kicks off the APAC session overnight before markets await the Advance reading of US Q4 GDP. Durable goods orders, pending home sales and jobless claims also on the docket.
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