Greenback Pressured By Dovish Minutes
Today’s Spotlight Market
The US Dollar Index sold off after the release of yesterday?s FOMC minutes, which was dovish on the surface.? The bulk of the language in the minutes was expected, as was the reaction by currency traders.? The Fed decided to tone down the rate hike talk.? Are the minutes as dovish as they appear on the surface?? Optimistic Fed economic projections were toned down and there was mention of worries over Greek and Chinese growth.? However, the minutes gave the impression that the Fed viewed the weaker GDP in Q1 as being heavily affected by weather and the West Coast port labor issues.? There was also mention of the improving labor market along with the emphasis on Q1 results being affected by extenuating circumstances. ?
Fundamentals
The FOMC statement was dovish in that it all but shot down the idea that the central bank will raise rates in June.? There is some frustration among Committee members that the economy has not improved enough for the Fed to raise rates.? There is also some cautious optimism that can be read into the report, which makes it perhaps not as dovish as it appears on the surface.? The new ?target date? for raising interest rates traders are looking for is now September.? There has also been economic data released since the meeting, which may force the Fed to adopt a more hawkish tone.? April Housing Starts were the best since the go-go days of the housing boom in 2007.? The ECB is going to step up its bond purchases in the coming weeks, ahead of the summer doldrums, which could negatively impact the Euro and give the Dollar some much needed support.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the cash Dollar Index (DXY) chart getting a bit of a technical bounce prior to reaching the 92.50 support level.? The market rebounded upon reaching the 150-day moving average and the DXY closing above the 20-day moving average.? This suggests that a near-term low may be in place.? It is of interest to note that the 14-day RSI indicator made a relative low in late April and rebounded.? Prices, however, continued to move lower, possibly forming a relative low last week.? This divergence suggests the recent downtrend could reverse course.
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