Original article by Edward Moya, OANDA Senior Market Analyst
Adapted and rewritten for clarity and depth
Title: An In-Depth Analysis of Forex Market Trends Following Fed Chair Powell’s Speech
Federal Reserve Chair Jerome Powell delivered a closely watched speech recently, offering limited new guidance on monetary policy. While Powell reiterated the Fed’s core message of being data-dependent and not rushing into rate cuts, his statements had muted impact on the US dollar. However, the broader forex market absorbed Powell’s tone and positioned accordingly, with several currency pairs reacting in technically significant ways.
Powell’s address supported the Fed’s strategy of waiting until inflation clearly trends down before making any monetary policy shifts. While some traders had anticipated stronger dovish hints, Powell remained cautious. The speech cemented current expectations in much of the FX market, preserving existing trends and supporting the greenback’s resilience.
Below is a detailed analysis of major currency pairs following the speech, focusing on technical levels and fundamental drivers.
US Dollar Outlook Post-Powell
The US dollar remained firm even though Powell refrained from offering a clearly dovish signal. The general tone of the speech reinforced a patient stance on rate adjustments, which allowed the dollar to stay within striking distance of its recent highs.
Key takeaways:
– Powell emphasized that the disinflation process is ongoing but gradual
– The Fed remains data-dependent; no clear timeline for cuts
– Financial conditions remain relatively tight, supporting the dollar
– Market pricing continues to reflect expectations of 1-2 cuts in the second half of the year
EUR/USD: Treading Near Key Technical Boundaries
The euro weakened modestly after Powell’s comments, with EUR/USD pulling back toward the 1.0700 handle. The pair remains stuck within a relatively tight trading range as both the ECB’s and Fed’s policies remain in focus. The euro has had difficulty sustaining rallies beyond 1.0800 and faces pressure amid eurozone growth concerns.
Technical analysis:
– Support: 1.0700 remains a strong near-term support zone
– Resistance: 1.0800 is a critical hurdle; a breakout could target 1.0880
– The 200-day moving average has capped recent rallies
– Bearish momentum builds if EUR/USD breaks below 1.0700 with conviction
Fundamental factors:
– Eurozone inflation remains soft, pressuring the ECB’s policy outlook
– Market expects the ECB to initiate rate cuts ahead of the Fed
– Weak economic data from Germany and France continue to weigh on sentiment
GBP/USD: Trading in a Fragile Range
The British pound was relatively stable after Powell’s remarks but remains subject to both US monetary policy bias and UK domestic factors. GBP/USD continues to face downside pressure, driven by cautious sentiment towards UK growth and subdued inflation progress.
Technical highlights:
– Support: 1.2600 psychological threshold; below this opens risk to 1.2500
– Resistance: 1.2750 is the key ceiling for bulls to reclaim
– A break above 1.2750 sets the stage for a move toward 1.2850
– Momentum indicators suggest the pair remains in consolidation mode
UK fundamentals:
– The Bank of England remains cautious but inflation is improving slowly
– Limited scope for GBP strength unless economic performance surprises to the upside
– Fiscal policy remains a concern, and political noise ahead of elections could weigh on GBP
USD/JPY: Surging Above 156 As Yield Differential Widens
One of the clearest beneficiaries of Powell’s non-committal stance was the USD/JPY, which rallied noticeably above 156. The yen remains heavily pressured by the yawning policy divergence between the Fed and the Bank of Japan.
Technical breakdown:
– Current level: USD/JPY broke to highs above 156.20
– Resistance: Next key resistance lies around 157.00 and then 158.20
– Support: 155.00 remains near-term support
Explore this further here: USD/JPY trading.