- US dollar turns on a dime following hawkish Fed Powell.
- DXY bulls ere 114.00 with prospects of a higher terminal rate at the Fed.
It was one of the most eventful Federal Reserve meetings since the start of the year with respect to market volatility. The US 10-year Treasury note yield bounced back above 4% as investors continue to see interest rates extending substantially higher until inflation is under control. The Fed's chairman, Jerome Powell flipped the switch on the day when he signalled a higher terminal rate, combatant in the face of risk-on markets that took off following a dovish FOMC statement.
Fed Chair Powell said during the press conference that incoming data since the last meeting suggested the terminal level of interest rates will be higher than expected. He said this after the FOMC decided to raise interest rates by 75bps, signalling more hikes, though possibly in smaller increases.
"In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial deviations," the statement reads.
However, rates shot higher when Powell's hawkish comments at the presser started to sink in, sending the US dollar in a U-turn:
-
Powell speech: Very premature to be thinking about pausing
-
Powell speech: Will likely need restrictive stance of policy for some time
-
Powell speech: Longer-term inflation expectations are still well anchored
-
Powell speech: Will take time for full effects of monetary restraint to be realized
-
Powell speech: Time for slower hikes may come as soon as December or February
US dollar & 10-year yield technical analysis
The 10-year yield has carved out the M-formation with the yield moving gin on the neckline and hugging the counter trendline. However, the retracement has potentially run its course in a 50% mean reversion. The bulls will need to get above 4.20% for a convincing upside continuation bias.
As for the greenback, DXY has rallied sharply into test 112.00.
Looking forward, if the bulls can get above 112.00 and then 112.50, there will be prospects of a move to 114.00.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD stays defensive below 0.6300 amid trade war fears
AUD/USD stays defensive below 0.6300 in Asian trading on Tuesday. Persistent risk-off mood amid geopolitcal and global trade war fears act as a headwind for the Aussie, offsetting broad US Dollar weakness-led by US economic growth concerns and dovish Fed expectations. US-Ukraine Summit eyed.
USD/JPY rebounds to 147.00 even as risk aversion persists
USD/JPY is off a five-month low, bouncing back to near 147.00 after the downward revision to the Japanese Q4 GDP print. However, the risk-off mood continues to underpin the safe-haven Japanese Yen, keeping the bearish pressure intact on the pair amid weaker US Dollar.
Gold finds demand ahead of US-Ukraine Summit
Gold price is licking its wounds below $2,900 early Tuesday, following three consecutive days of sellers’ rejoicing. All eyes now turn to the US economic data releases for fresh trading impetus, with the JOLTS Job Openings data due later on Tuesday, while the key Consumer Price Index (CPI) report will be published on Wednesday.
The crypto market cap dips to $2.44 trillion while Mt. Gox moves 11,833 BTC worth $932 million
The crypto market continued its ongoing downleg as the week started, as its market cap capitalization reached a low of $2.44 trillion on Tuesday, levels not seen since early November.
Gold finds demand ahead of US-Ukraine Summit
Gold price is licking its wounds below $2,900 early Tuesday, following three consecutive days of sellers’ rejoicing. All eyes now turn to the US economic data releases for fresh trading impetus, with the JOLTS Job Openings data due later on Tuesday, while the key Consumer Price Index (CPI) report will be published on Wednesday.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.