Chair Powell participates in the virtual Federal Open Market Committee (FOMC) press conference on April 28, 2021. Image source: Federalreserve, flickr.com
The dollar weakened yesterday following the April policy meeting of the FED, as Jerome Powell and his colleagues from the FOMC downplayed the immediate risks to recovery from rising prices in the short term. The bearish sentiment on the USDCHF increases.
Greenback's woes were exacerbated during yesterday's trading session, and not even the robust earnings season the U.S. is proving enough to offset the temporary bearish pressures on the dollar.
USDCHF 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
As shown on the daily chart above, the dollar depreciated yesterday and is currently headed towards the 100-day MA (in blue). Notice that the latter is threading near the 23.6% Fibonacci retracement level at 0.90347, which is where the downswing is likely to bottom out.
The bearish correction is likely to take the form of an ABC structure given that it emerged from the preceding 1-5 impulse wave pattern, as postulated by the Elliott Wave theory. This is further substantiated by the fact that the correction appeared from the 61.8 per cent Fibonacci retracement at 0.94670.
Expect the USDCHF to consolidate in a range between the 23.6 per cent Fibonacci and the 38.2 per cent Fibonacci retracement at 0.92000 in the medium turn, taking the form of said ABC correction. The significance of this consolidation range is further exemplified by the fact that it is currently encompassed by the 100-day MA and the 50-day MA (in green).
The current trending sentiment is elucidated by the ADX indicator, which has been threading above the 25-point benchmark since the 26th of February. Accordingly, the bullish upswing is likely to be restarted after the price tests the 23.6 per cent Fibonacci for a second time - point C.
Powell and the FED remain accommodative, eyeing sustained recovery
The FOMC expectedly decided to maintain the near-negative Federal Funds Rate unchanged at 0.25 per cent. The Committee also remained unalarmed by the recent uptick in consumer prices and remains committed to see inflation converge around the 2.0 per cent target in the medium term.
U.S. Headline Inflation Rate. Image source: TradingEconomics.com
"The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement."
The market appears to have started to price in the news, and the initial volatility upsurge is beginning to subside. Expect the dollar to attempt to strengthen shortly after yesterday's dive.
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