How Much Lower Can EUR/USD, GBP/USD Go in Light of Powell's Hawkish Remarks?
The US dollar index is on track to extend its winning streak for the 10th consecutive week, maintaining its robust outlook. This strength is bolstered by the persistent hawkish stance of the Fed after the decision to keep interest rates unchanged this month, as well as lackluster economic data emerging from Europe.
Following the latest Fed meeting, the central bank made it clear that they intend to keep interest rates elevated for an extended period. They also kept the door open for potential further rate hikes as part of their tightening policy, contingent on future economic data. These statements have resulted in an increase in US Treasury yields.
US 2-year Treasury yields, for instance, surged to 5.31% after the interest rate decision, while the 10-year US Treasury yield climbed to 4.51%, marking its highest level in the past 16 years.
Furthermore, the lower-than-anticipated initial jobless claims underscored the resilience of the economy. In contrast to these signs of weakness in other global regions, the demand for the US dollar remains strong, fueling the continued ascent of the DXY.
Technically speaking, after breaking out of the bearish channel in 2023 in September, the DXY rose to 105.78 this week and started to test the March peak.
In case of a weekly close above this region, it is likely to move towards the 106 — 108 band in the short term. This move would support the uptrend originating in July, subject to the condition that the lower peak formation is broken. For the next target zone, we can see that the 110 — 113 level may be on the agenda.
Short-term EMA values also have the ideal alignment to support the bullish outlook on the daily chart. On the other hand, the tendency of the Stochastic RSI for the DXY
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