empty
02.12.2022 06:46 AM
We are discussing Powell's speech.

The demand for US currency significantly dropped on Wednesday night and Thursday during the day. Due to this, the euro/dollar and pound/dollar instruments saw price increases of about 200 and 300 basis points, respectively. In yesterday's reviews, I already conducted a thorough analysis of the news landscape of these days. I concluded that economic data could not have a significant enough impact on market sentiment to cause the US dollar to depreciate significantly against the euro and the pound. The market did not react that way because the news background was not that bad for the dollar. The only thing that has anything to do with the US dollar's decline is Jerome Powell's speech on Wednesday night.

Other analysts have written quite a bit about this subject, and most concur that Powell's speech didn't offer anything novel or demoralizing. The Fed President noted that economic growth is below the anticipated trajectory, inflation is still very high, and a slowdown in the rate increase could occur as early as December. However, he added that the interest rate might rise for longer than the Fed had anticipated in September. What qualifies as the "hawkish" element? Why did the market respond to the "dovish" statements rather than him? Other FOMC members have expressed this "dovish" rhetoric numerous, but the market did not retaliate as violently.

I don't think explaining how the market reacted to the speech is worthwhile because it initially "aimed" at buying both instruments. Just look at how the US session began on Thursday and how the US dollar immediately began to decline (and both instruments up). Although Powell's speech was given days earlier, the American statistics at the start of the session had yet to be made public. However, the market also identified factors that reduced demand for the dollar. Thus, I conclude that, rather than Powell's speech being full of "dovish" theses, the market decided that the demand for the dollar was declining. It didn't abound, though.

This image is no longer relevant

What comes next? The wave e peak on the euro currency has been broken once more, and the wave marking may get even more complicated. The British pound believes that everything is the same. Another significant Nonfarm Payrolls report will be released in the USA today, which is expected to send the market into a frenzy. But I think the market won't care what this report is worth. Regardless of how compelling the report is, the value of the US dollar will decline if they decide to keep selling it. Perhaps I need to be more accurate and treat the market fairly. I would be okay if the situation changed the next day completely. But if the market interprets the news background in its convenient manner, what use is it to analyze it at all?

I conclude that the upward trend section's construction is complete and has increased complexity to five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. The trend's upward portion could become more complicated and take on a longer form, and the likelihood of this happening is increasing daily.

This image is no longer relevant

The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I cannot suggest purchasing the instrument immediately because the wave marking already permits the development of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form.

Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

What to Pay Attention to on June 10? A Breakdown of Fundamental Events for Beginners

There are a few macroeconomic reports scheduled for Tuesday. The economic event calendars for both the Eurozone and the United States are empty, while the UK will release reports that

Paolo Greco 06:40 2025-06-10 UTC+2

GBP/USD Overview – June 10: A New Trial for Trump

The GBP/USD currency pair showed no interesting movements on Monday. However, given the current situation in the U.S., it's hard to envision any growth for the dollar. It turns

Paolo Greco 04:11 2025-06-10 UTC+2

EUR/USD Overview – June 10: Riots, Protests, Unrest

The EUR/USD currency pair traded very sluggishly on Monday. That's unfortunate because the news background becomes more interesting each day. This time, the news was not about trade tariffs

Paolo Greco 04:11 2025-06-10 UTC+2

EUR/USD: Calm Before the Storm? The Market Awaits News from London

The EUR/USD pair continues to trade within a 100-pip price range of 1.1350–1.1450, bouncing between its boundaries. Buyers are trying to hold within the 1.14 area, while sellers

Irina Manzenko 00:38 2025-06-10 UTC+2

The Dollar Feels Its Strength

A strong economy means a strong currency. In early June, the U.S. economy began to look strong again. EUR/USD bears anticipate a correction in the current upward trend, prompted

Marek Petkovich 00:38 2025-06-10 UTC+2

Strong Employment Report Supports the Canadian Dollar

Net employment change in May amounted to +8.8 thousand jobs, exceeding April's growth and presenting very strong data, especially against expectations — a loss of about 15 thousand jobs

Kuvat Raharjo 15:05 2025-06-09 UTC+2

AUD/USD. Analysis and Forecast

At the beginning of the new trading week, the AUD/USD pair is showing steady upward momentum, recovering from a slight pullback and once again approaching the highs seen in November

Irina Yanina 14:51 2025-06-09 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair is showing moderate weakness on Monday, dropping toward the psychological level of 144.00. The decline is driven by a combination of factors, including the strengthening

Irina Yanina 14:05 2025-06-09 UTC+2

WTI - West Texas Intermediate. Analysis and Forecast

At the start of the new week, prices for West Texas Intermediate (WTI) crude oil are attempting to stay near Friday's highs. Senior U.S. officials, including Treasury Secretary Scott Bessent

Irina Yanina 14:02 2025-06-09 UTC+2

Old Donald the Fighter Seems to Have Broken Down (there is a likelihood of continued growth in CFD contracts #NDX and #SPX)

Despite all the hardships, uncertainty, and overall market tension, stock indices persistently climb higher. Investors believe that Donald Trump will have to back down and retreat in his confrontation with

Pati Gani 10:06 2025-06-09 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.