- The US Dollar trades softer across the board on Wednesday.
- US Federal Reserve Chairman Jerome Powell is heading to Capitol Hill for his semi-annual testimony.
- The US Dollar Index snaps an important support, looking bleak ahead of the ECB decision and NFP data.
The US Dollar (USD) is encountering significant selling pressure on Wednesday, leading up to the semi-annual testimony by US Federal Reserve Chairman Jerome Powell at Capitol Hill. Traders find themselves in a state of uncertainty due to mixed data, creating ambiguity regarding the anticipated timing of potential rate cuts by the Fed for this year. This has resulted in a four-day losing streak for the Greenback, with Powell’s testimony, the European Central Bank (ECB) meeting on Thursday, and the US Nonfarm Payrolls data on Friday looming on the horizon.
On the economic calendar front, traders have some appetizers to sink their teeth into. The ADP Private Payrolls slightly missed expectations, and later, the JOLTS job openings reports will provide further insights into the state of the job market. However, traders are anticipated to exercise caution and withhold action until Powell’s speech, expected to be delivered as he takes his seat before the Congressional hearing committee.
Daily digest market movers: ADP small miss
- At 12:00 GMT, the weekly Mortgage Applications number was released. The previous number was a 5.6% decline, with an increase to 9.7% for this week.
- ADP has released its Private Employment number, and the actual number came in at 140,000 instead of the expected 150,000. The previous number got revised up from 107,000 to 110,000.
- At 15:00 GMT, Wholesale Inventories for January will be released, with expectations of another mild 0.1% contraction as was seen in December.
- JOLTS Job Openings data for January, also at 15:00 GMT, are expected to fall from 9.026 million to 8.9 million.
- US Federal Reserve Chairman Jerome Powell will make his statement and reply to questions from Congress at 15:00 GMT. Normally, markets will react even before he sits as the statement will be released by the Federal Reserve just minutes before the speech takes place.
- The Fed speak for this Wednesday does not stop with Powell. San Francisco Fed President Mary Daly will be speaking around 17:00 GMT, followed by Minneapolis Fed President Neel Kashkari around 21:15 GMT. In between both speakers, the Fed’s Beige Book will be released as well.
- Equities are pushing forward in their recovery and are seeing accelerated gains in the ADP print aftermath. The Nasdaq is leading the rally with a near 1% jump ahead of the US opening bell.
- According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 97%, while chances of a rate cut stand at 3%.
- The benchmark 10-year US Treasury Note trades around 4.13%, roughly sideways, seeing last week’s range.
US Dollar Index Technical Analysis: Down, though not KO just yet
The US Dollar Index (DXY) is witnessing traders becoming somewhat preemptive as pressure intensifies on a crucial support level in the DXY. The 200-day Simple Moving Average at 103.73 is once again under strain, marking the fifth breach in three weeks. With the three key events yet to unfold, it appears that some traders are anxious about potential missed opportunities and may find themselves on the wrong side of the trade due to premature positioning.
The US Dollar breached the 100-day Simple Moving Average (SMA) around 103.88 on Tuesday; however, a bullish signal would require a daily close above this level. If the US Dollar manages to surpass it, the next immediate target is 104.60. Beyond that, the focus shifts to 105.88, the high observed in November 2023. Ultimately, the level of 107.20, corresponding to the high of 2023, may re-enter the scope.
Observing the downside, the 200-day Simple Moving Average (SMA) at 103.73 is facing renewed pressure. Considering it avoided a daily close below this level last week, emphasizing its significance. The 200-day SMA is likely to offer some support, suggesting a modest retreat back to this level might be plausible. However, if it loses its effectiveness, the next potential support zones include 103.22, aligned with the 55-day SMA, and the psychological level of 103.00.
