The dollar continued to strengthen during the last 24 hours amid an optimistic sounding testimony of Jerome Powell and a satisfactory release of GDP data. The current downtrend may continue if today’s releases won’t come disappointing. Support is seen at 1.215, resistance at 1.225.
The US dollar is still enjoying support and strong market sentiment after Jerome Powell struck optimistic tone in hist first testimony before the Congress. Although some concerns that Washington would be happy to see weaker dollar remain, the markets are speculating that the Fed will decide to hike rates not three, but four times this year. Yesterday’s data showed a strong condition of the US economy as the GDP came at 2.5%. More important data will be released today, as we are awaiting for the PCE inflation numbers, which are closely watched by the FED.
Mario Draghi said on Monday that slack in the european economy may be actually bigger than it was previously estimated. The euro fell today against the US dollar to the lowest level since January 18. Yesterday’s data showed a drop of inflation in February to 1.2%, the lowest level in 14 months. Although the reading came in line with the expectations, it moved away from the 2% target set by the EBC once again. This significantly decreases hopes for any shift in the EBC’s current monetary policy and probability of a rate hike in the euro zone this year.
Pic.1. EUR/USD chart.
The dollar index has climbed to the highest level in five weeks, while the euro is unable to find some support. Once again the events in the US will be the main factor driving the pair today. If PCE and ISM readings won’t be disappointing, the pair will most likely continue to drift lower.