In the immediate term, profit-taking could take the buck slightly lower from the current levels
The USD rallied across the market on Friday amid more hawkish than expected comments from Powell at the Jackson Hole event. The Fed governor reiterated that restoring the price stability will likely require maintaining a restrictive policy stance for some time. Also, Powell said the size of the rate increase in September will depend on the incoming economic data. Following the statement, the probability of a 75-basis points rate hike climbed to 70% from 40% early Friday.
After solid weekly gains, the greenback started the new week on strong footing to reach fresh two-decade highs around 109.50 earlier on Monday. The USD index has retreated into negative territory since then, holding marginally above 109.00 in early pre-market deals while US stock index futures stay under pressure, losing around 1% already. As of writing, the dollar was changing hands around 109.11, shedding just 0.1% on the day.
In the immediate term, profit-taking could take the buck slightly lower from the current levels, but the overall bullish trend should remain intact as traders continue to adjust to the hawkish message from Powell. On the other, the ongoing debate around the size of the September’s interest rate hike could bring extra volatility in the dollar at this stage.
Technically, the index could derive support from 108.80 in case of modest downside pressure during the correction. On the upside, should the index manage to hold above 109.00, the dollar may retarget the mentioned multi-year tops, followed by fresh highs in the 110.00 area. Fresh economic data out of the United Stated the NFP employment report could affect USD’s short-term dynamics as well.