USD Rally Pauses

Traders are keenly awaiting a fresh slew of Fed commentary today, including Fed chairman Powell who is due to speak later. USD has started off the week on a strong footing following better-than-forecast ISM manufacturing data on Monday and JOLTS job openings data yesterday. However, the rally was dented by comments from Fed’s Mester who shared her view that data might support the idea of a June rate cut.

Mester Points to June Cut Chances

Speaking at a business economics association conference in Cleveland, Mester signalled that if the economy and inflation continue to develop in line with projections, she expects the Fed to press ahead with projected rate cuts. However, Mester warned that she wants to see more data on inflation before making the decision to begin easing and signalled that she felt unlikely to have enough data at the next meeting adding that June could be a likely point for the gradual easing process to begin.

Powell On Deck

Traders will now look to see if these comments are echoed by the Fed chair later today. If Powell too is seen pointing to a likely June rate cut, this should create near-term headwinds for USD, greenlighting risk markets for a fresh push higher. Along with scheduled Fed commentary traders will also be watching ISM services data and ADP employment due today.

Technical Views

DXY

The breakout above the bear trend line has stalled for now into a test of the 104.95 highs. While above 103.48, the focus is on eventual break higher and a test of the 107.04 level next, in line with bullish momentum studies readings. Below 103.48, 102.49 is the next support to note. 

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