The unscheduled statement released by the Federal Reserve on Friday, February 28 knocked US Dollar lower.  The comments from Fed’s chair Jerome Powell mentioned that the fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. They will use tools and act as appropriate to support the economy. The market has taken this statement as a hint that The Fed will be cutting rates in next March meeting.  The debate right now is whether it will be 25 bps or 50 bps cut. A few firms, such as Barclays (BCS) and Goldman Sachs (GS), have predicted 50 basis points cut in March.

US Dollar Index 2.29.2020 4 Hour Weekend Elliott Wave Update

The chart from 2.29.2020 4 hour weekend update showed that the US Dollar index has ended the correction from the October 2, 2019 peak in wave b at 96.335 low. Up from there, the index bounced higher in wave ((1)) as a 5 waves impulse Elliott Wave structure. Wave ((1)) ended at 99.91 high, which broke above the previous October 2 peak and now has a bullish sequence.  From there, the index is now correcting the cycle up from the December 31, 2019 low in wave ((2)).

Currently, wave (A) of ((2)), which subdivides in lesser degree 5 waves, remains in progress. Wave 1 of A ended at 98.88 low and the bounce in wave 2 ended at 99.26 high. From there, the index extended lower in wave 3 and ended at 98.02 low. Wave 4 bounce ended at 98.65 high. The index can still extend lower to end wave 5 before a bigger 3 waves bounce in wave (B) can be seen. As long as the pivot at 99.91 high stays intact, expect the bounce in 3,7, 0r 11 swings to fail. Afterwards, the index can extend lower in wave (C) before upside resume.