As we discussed in the Week Ahead, tomorrow US Fed Chairman Powell will give his semi-annual testimony on Monetary Policy to the US Senate. Since the FOMC meeting in January, commodities have gone higher. Yet fed officials, including Powell himself, have said the increase in commodities is transient. Expect more to this language tomorrow when Powell testifies.
As result of the Fed’s dovishness, along with rising commodity prices, the US Dollar Index is moving lower and appears to have broken the neckline of a head and shoulders pattern.
The euro makes up 57% of the us dollar index, so we could expect that the EURO VS the US Dollar is doing the inverse. EUR/USD is trading right at the neckline of the inverse head and shoulders.
If Powell continues with his dovish views, watch for EUR/USD to go higher and US Dollar lower. The Q&A portion will be important as, hopefully, as least one of the senators will question him on his dovish views.
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