US Dollar retreats as recession fears emerge after Powell’s hawkish message – Crypto News

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• The US Dollar loses territory against most G10 currencies.
• A lot of headlines to hit the markets in the US session with five Fed speakers an several data points.
• The US Dollar Index breaks below 102.00 and is at risk of sliding to 101.00.

The US Dollar (USD) lost substantial ground against most major currencies like the Euro or the Swiss Franc as US Fed Chairman Jerome Powell communicated to the markets that more than one rate hike will be needed to get inflation back to 2%. Investors got spooked by this as some economic datapoints have been deteriorating under the current elevated rate level from the Fed, and more hikes could tilt the US economy into a full recession. Equities sold off and the soured mood continued on Thursday in both Asia and Europe.

The second day of hearings with Fed Chairman Powell is on the agenda at around 14:00 GMT, this time facing the US Senate Banking Panel, though his message is not expected to change much from his speech on Wednesday. Before, a batch of data will come out at 12:30 GMT, including jobless claims, which last week sparked substantial US Dollar weakness as the figure came higher than expected. At 14:00 GMT, Existing Home sales – the final batch of housing numbers for this week – will come out, together with The Conference Board’s Leading Economic Index.

Daily digest: US Dollar sentiment bearish

• A slew of US data is due at 12:30 GMT. The Chicago Fed National Activity Index is forecast to come in at zero for May after a 0.07 increase in April. Jobless Claims data is set to be key as last week’s higher-than-expected increase in Initial Claims triggered substantial US Dollar weakness. Initial Claims for the week ended June 16 are expected at 260,000 against 262,000 the week earlier. Continuing Claims are anticipated to jump to 1,782K against 1,775K from last week.
• The last data points on US housing activity are due to come out at 14:00 GMT. Existing home sales are seen sliding from 4.28M to 4.25M, with the monthly number expected to decline by 0.6%, less than the 3.4% decrease registered in April. , Meanwhile, The Conference Board’s Leading Economic Index for May is also expected at 14:00 GMT. In April, the index declined 0.6% on the month. ,
• Western Texas Intermediate (WTI) Crude Oil to be moving today once the weekly US oil inventories are published at 15:00 GMT. Crude trades at $71, residing at a weekly low..
• Apart from Fed Chairman Powell, a few other Fed members are set to speak. At 08:00 GMT Fed Governor Christopher Waller delivers opening remarks at the Central Bank of Ireland conference. Fed’s Michelle Bowman delivers opening remarks around 13:55 GMT at a Fed event hosted by the Federal Reserve Bank of Cleveland. Cleveland Fed President Loretta Mester speaks on the economic and policy outlook at the Cleveland’s annual Policy summit around 14:00 GMT. To close off the speakers, Richmond Fed President Tom Barkin is to speak at the Risk Management Association in Richmond, Virginia.
• The US Treasury places a 4-week, an 8-week and a 5-year Tips bond auction.
• Equities are in the red and in sell-off mode. The China Hang Seng Index is down 2%, the German DAX falls over 1.10% and US equity futures are all three in the red. The VIX volatility index jumps back to near 14.
• The CME Group FedWatch Tool shows that markets are pricing in a 71.9% chance of a 25 basis points (bps) interest-rate hike on July 26th. The dislocation between market expectations and the Fed communication is getting bigger as Fed Chairman Powell alluded to possible two more hikes, while markets only expect one.
• The benchmark 10-year US Treasury bond yield trades at 3.75% and remains quite stable as no real flight into bonds is unfolding, rather the opposite with some selling of bonds, triggering a slightly higher yield.

US Dollar Index technical analysis: watch out for the avalanche to 101.00

The US Dollar is taking a firm step back against most currencies. Gains against the South Korean Won and the Japanese Yen are softening the blow a bit, while the risk of a further jump higher for the EUR/USD pair grows. This results in the US dollar index (DXY) breaking below 102.00, printing a new monthly low.

On the upside, the 55-day Simple Moving Average (SMA) at 102.58 is acting as resistance and could limit any recovery. Should the DXY edge up further, look for the 103.00 psychological level as the next big challenge to the upside. The 100-day SMA at 103.06 will be key to reach should the DXY want to advance even more..

On the downside, the psychological level near 102.00 has been breached and is no longer in play. Once price action starts to further move away from it, expect to see risk growing for nosedive move towards 100.82. That means a challenge to this year’s low and would imply a substantial devaluation for the Greenback to come.