The Dollar strengthens significantly against commodity currencies, as AUD/USD, NZD/USD, and USD/CAD all form bearish engulfing patterns. The Federal Reserve’s less dovish stance continues to support the greenback, while markets await crucial US-China trade talks. Technical analysis suggests further upside potential for the USD in the short term, with key resistance levels in focus.
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Dollar Gains Momentum After Fed Policy Decision and Ahead of Trade Talks
The Dollar has emerged as the strongest among major currencies following the Fed’s decision to keep interest rates unchanged. As commodity currencies have weakened, the USD Index has shown renewed strength, reflecting a shift in market sentiment towards the US currency.
Federal Reserve Maintains Steady Course on Dollar Interest Rates
This week’s FOMC meeting ended with the Fed leaving its USD policy rate unchanged and shifting to a less dovish stance than previously stated. The Fed highlighted the growing risks to both its dual goals – concerns about rising unemployment and persistent inflation, which pose a significant obstacle to the possibility of a rate cut.
Market analysts note that, while there has been no discussion of a Dollar rate hike, the possibility remains open if trade tensions escalate. With markets still pricing in a rate cut, the Fed appears to be taking a less dovish stance than markets expect in the short term.
Dollar Performance Awaits US-China Trade Developments
Traders’ attention is now shifting to the upcoming US-China trade talks, which could have a strong impact on currency valuations. Former President Trump has expressed his intention to reduce tariffs on Chinese goods, but details of the reduction and retaliatory demands remain unclear.
This weekend’s talks could be pivotal for the strength of the USD, potentially creating a big move when markets open on Monday if the outcome of the talks is announced.
Dollar Technical Analysis Against Major Commodity Currencies
The Dollar showed notable strength against commodity currencies on Wednesday, with AUD/USD, NZD/USD, and USD/CAD all producing bearish engulfing candles – a technical signal reinforcing expectations of pullbacks from recent rallies.
AUD/USD Analysis: Australian Dollar Weakens Against USD
The AUD/USD pair formed a bearish engulfing candle, marking its most negative session since April 4. This pattern coincided with a false break above the 0.65 threshold, a daily close below the 200-day simple moving average (SMA), and bearish RSI divergence – all supporting the case for AUD/USD retracement.
Expectations suggest a potential move toward the April volume point of control at 0.6370, possibly occurring within one to two trading sessions based on recent AUD/USD volatility patterns. Traders looking to capitalize on USD strength might consider entering on retracements toward the 200-day SMA at 0.6455.
See more related articles: US china trade dollar fed
NZD/USD Analysis: New Zealand Dollar Shows Vulnerability to USD Strength
The NZD/USD pair displayed a bearish engulfing pattern alongside confirmation of a lower high beneath the recent peak. This technical formation suggests a potential double top just below November’s high, accompanied by bearish RSI divergence signaling Dollar strength.
Technical indicators point to an ABC corrective pattern potentially unfolding in the NZD/USD pair. Wave equality projections target the 200-day SMA and the 0.5894 support level, while Fibonacci extension analysis suggests wave C could extend just above the 0.58 mark.
USD/CAD Analysis: USD Shows Reversal Potential Against Canadian Dollar
The USD/CAD pair continues to show signs of a potential bullish reversal, supporting the case for USD strength. Bearish momentum has notably diminished over recent weeks as sellers struggle to push prices lower around October’s volume point of control, with a bullish divergence pattern forming.
Current analysis suggests a potential move toward the 1.40 level for USD/CAD, with further movement contingent upon trade policy developments and USD sentiment.
GBP/USD Analysis: British Pound Faces Technical Pressure Against Dollar
The GBP/USD daily chart reveals a potential head and shoulders top formation, which could be confirmed by a break below the neckline or the 1.3260 support level. This pattern projects a target around 1.3080 for the GBP/USD pair, though intermediate support exists near the 1.3200 high and the monthly pivot point at 1.3158.
The head and shoulders pattern’s probability of completion increases if the Bank of England adopts a more dovish tone and if US-China trade discussions conclude positively, both scenarios potentially strengthening the USD.
Key Economic Events Affecting Dollar Valuation
Market participants should monitor these upcoming economic releases for potential Dollar impact:
- 09:50 – BOJ monetary policy minutes
- 13:35 – Japanese 10-year JGB auction
- 16:00 – German Industrial Production (MoM) (Mar)
- 21:00 – BoE Interest Rate Decision (-25bp cut expected)
- 23:30 – US Jobless Claims (direct USD impact)
- 23:15 – BOE Governor Bailey Speaks
The above events could create significant volatility for the USD, especially US employment data and policy decisions from the Bank of England.
Dollar Outlook: Balancing Federal Policy and Trade Tensions
The USD continues to be supported by the Fed’s less dovish stance, but faces the risk of volatility due to trade negotiations. Technical patterns across major currency pairs suggest that market sentiment is tilted towards the USD in the short term, but the direction of the move will depend largely on upcoming economic data and policy decisions.
Traders should closely monitor US-China trade developments over the weekend, as these could significantly impact the Dollar valuation when markets reopen for the new trading week.
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