US Dollar Digs Into Fibonacci Support As EURUSD Range Remains


The US Dollar pullback continues into mid-week as the US currency has re-engaged with support at a key Fibonacci level. The price of 96.47 is the 23.6% Fibonacci retracement of the 2011-2017 major move in DXY, and this is a level that’s been in-play numerous times over the past six months. The Dollar dropped yesterday on the heels of some comments from FOMC member, Loretta Mester. Ms. Mester opined that balance sheet reduction could be slowed this year, an indication of potentially even less tightening in monetary policy. This comes in stark contrast to last year’s dual-tightening strategy, in which the bank was both allowing for balance sheet runoff while also hiking rates.

That theme hit fever pitch in Q4, just on the heels of some comments from FOMC Chair, Jerome Powell. When Mr. Powell said that he felt the bank was ‘a long way’ from the neutral rate, markets inferred this to mean that there were many more hikes planned at the US Central Bank. But as risk aversion roared in Q4, the Fed started to slow that hawkish verbiage until, eventually, the bank was ready to put rate hikes on hold in 2019.

This theme comes to light later this afternoon upon the release of FOMC meeting minutes from the January rate decision. The US Dollar embarked on a stern topside run after that meeting, rallying all the way into last week, at which point a range began to build near 2019 highs. Yesterday brought a notable backing-down of the bulls after Ms. Mester’s comments made their way through markets, and prices have since begun to dig-in to support at that 96.47-handle. The next area of interest on the support side of the matter is 96.04, as this is the 50% marker of the 2017-2018 bearish run in USD.


us dollar usd two hour price chart

Chart prepared by James Stanley


On the final trading day of January, a flicker of hope showed in the Euro. Prices in EURUSD temporarily tested above the 1.1500 psychological level, which marks the topside of a resistance zone that’s now been in-play for more than three months. While a litany of themes and drivers have shown over this period, EURUSD has remained in a range formation. Support has continued to show from 1.1215-1.1300 with resistance holding from 1.1448-1.1500. But as the page turned into February, and as USD bulls began to make their mark after the January FOMC rate decision, a smooth short-term trend drove EURUSD right back down to support.

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