Can Bulls Breakout Around FOMC Minutes?

Can Bulls Breakout Around FOMC Minutes?

US Dollar Catches a Bid Ahead of FOMC Meeting Minutes

Is this the week that the US Dollar finally breaks out? This was the central question in this week’s Technical Forecast on the US Dollar, and this links with a theme that’s been brewing for the past five months. Prices in the US Dollar have been digesting within an ascending triangle formation. Resistance has held through three different tests in November, December and then again in March after the ECB rate decision. And support has continued to build since September, with the most recent inflection coming-in after the FOMC rate decision last month.

This type of formation will often be approached in a bullish manner, looking for the motivation that’s continued to drive-in bulls at higher-lows to, eventually, take over around resistance to allow a breakout through the horizontal level. This was the focus in the Q2 Technical Forecast for the US Dollar, looking for the topside of that formation to be taken-out at some point during the second quarter of this year.

 

US Dollar Daily Price Chart

The big question at this point is whether the backdrop is amenable enough for bulls to pose that push anytime soon. This morning brought a couple of different drivers to the table, each of which served to push the US Dollar higher. The ECB rate decision saw no new announcements, but a bit of dovish commentary from ECB President Mario Draghi helped to push EURUSD back-down towards short-term supports. And the CPI report released out of the US showed Core CPI still at the Fed’s 2% target, and headline CPI came in a touch above expectations, printing at 1.9% versus the 1.8% that was expected.

Collectively, this morning’s drivers helped to perk the US Dollar up towards that batch of prior resistance.

US Dollar Talking Points:

The release of FOMC meeting minutes from the bank’s March rate decision; and that was a big meeting in the realm of expectations around Fed policy. This is when the bank finally cut rate forecasts for 2020 after a push of volatility showed up in Q4. FOMC tonality has been key to the Q4 sell-off and then the ensuing reversal that showed-up in Q1 as the bank grew less-optimistic around growth in the world’s largest economy.

Just how dovish is the Fed? And how open is the bank to rate hikes later in the year? The details contained in today’s meeting minutes could carry a large bearing on the risk-trade given expectations that have built around the FOMC’s future posture. This morning has also brought a couple of high-impact items with the ECB rate decision along with US CPI numbers for the month of March, with Core CPI printing at 2% versus a 2.1% expectation, and headline CPI coming in at 1.9% against a 1.8% expectation.