Top Story

Dollar remains in limbo as Fed uncertainty persists

  • Fed Chair Janet Yellen’s testimony before both chambers of Congress on Tuesday/Wednesday appeared to strike a slightly more hawkish tone, as Yellen stated that it would be “unwise” to delay raising interest rates further.
  • When the dust settled, however, dollar traders are not any closer to discerning when or whether a rate hike might occur on the immediate horizon. Though Yellen did note that gradual normalization of monetary policy is warranted given increases in employment and inflation, she also qualified that by acknowledging risks and uncertainties in the economy – including unknowns regarding US fiscal policy.
  • Though the US dollar had been given a boost in the days preceding and during Yellen’s testimony, Thursday saw a sharp pullback as continued Fed uncertainty weighed on the greenback.
  • At the current time, the Fed Fund futures market continues to see a relatively low 22% probability of a mid-March rate hike. May and June prospects rise considerably higher, but those higher probabilities have arguably already been priced-in to the recently rebounding dollar.
  • Speculation over Fed action has long been one of the primary movers of the US dollar against its global currency counterparts. But when the uncertainties surrounding the trade/economic policies of the new and volatile Trump Administration are added to the mix, the dollar is now subject to many different and often opposing factors.
  • From a technical perspective, the USD/CHF currency pair dropped back below parity (1.0000) on Thursday as the US dollar pulled back. This drop was initiated a day earlier (Wednesday), after USD/CHF briefly pierced 1.0100 to the upside before forming a “shooting star” bearish reversal candle right around the 50-day moving average and a key 50% Fibonacci retracement level. With any continued short-term downside ahead of the next Fed meeting a month from now, the nearest major bearish target is around the 0.9850 support level, which is the area of the last major low.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. GAIN Capital Group, LLC is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission (CFTC)and is a member of the National Futures Association (NFA # 0339826) in the US, GAIN Capital UK Ltd is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, GAIN Capital Australia Pty. Ltd is regulated by the Australian Securities and Investment Commission (ASIC) in Australia, and GAIN Capital Japan Co. Ltd is authorised and regulated by the Financial Services Agency (FSA) in Japan. Please read Characteristics and Risks of Standardized Options.