DOLLAR CONTINUES TO STRENGTHEN AS MARKETS WAIT FOR POWELL TESTIMONY

The dollar strengthened as traders waited for the second testimony from the Fed Chair, Jerome Powell. In his previous statement to congressional members, Powell surprised the markets by predicting that the Fed would make four interest rate hikes this year. Traders expected three hikes. In the US, data showed that initial jobless claims dropped to 210K, down from last month’s 220K. This was the lowest drop since 1969. Month-on-Month (MoM) personal spending dropped to 0.2% from last month’s 0.4% while personal income growth remained the same at 0.4%.

In the United Kingdom, the Brexit debate continued to elicit mixed reactions. Today, the European Union parliament rejected Theresa May’s transition proposals. In a surprising vote, parliament voted against Theresa May’s proposals on EU migrants coming to the UK after May 2019. This came as a proposal by the EU to keep the Northern Ireland region in the EU met resistance in the UK. Apart from Brexit, the economic data released today showed that house prices fell as incomes declined. In addition, manufacturing data showed that manufacturing fell to 55.2 down from last month’s 55.3. However, this was a bit higher than the 55.1 traders had expected.

In Switzerland, government data showed that the country’s Q4 GDP expanded at an annualized rate of 1.9%. This was higher than the previous quarter’s 1.2% and the consensus of 1.8%. The country’s MoM GDP grew at 0.6%, which was higher than the expected 0.5%.

EUR/USD

The EUR/USD pair continued to fall as traders waited for the statement from Jerome Powell before a senate committee. In December, the pair established a double bottom position and started to rally. It moved from a low of 1.1714 to a high of 1.2555 in February. During this upward move, the pair established a strong Impulse Elliot Wave pattern. A week ago, the pair started creating a corrective Elliot Wave which could take it to below the 1.2125 level.

GBP/USD

The cable dropped to the lowest level since January, 17 following increased tensions about Brexit and a stronger dollar. The pair is now trading at 1.3978. The pair seems to have bottomed based on the double MAs shown below. This means, a short-term reversion cannot be ruled out. However, it will remain a volatile pair because of the happenings in the UK.

USD/CHF

The pair continued its upward momentum and is currently trading at a near 2-month high of 0.9483. The pair is currently in the third wave of the Elliot Wave which means that it could have a short-term correction as it tries to form the fourth wave. This could see the pair fall to the 0.9444 level before starting another upward trend to complete the impulse wave.