US Dollar (DXY) Rattled by a Slightly Less Hawkish Fed Chair Powell

US Dollar (DXY) Price and Chart Analysis

  • The US dollar slips after the Fed chair dials back on the hawkish narrative.
  • S&P 500 and the Nasdaq 100 are within touching distance of new multi-week highs.

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Fed chair Jerome Powell said yesterday that the process of lowering inflation has begun. ‘but still has a long way to go’, before adding ‘these are the very early stages of disinflation’. Chair Powell used the word ‘disinflation’ for the first time in many years at last week’s FOMC meeting and it now looks as though we can expect to hear it on a regular basis going forward as price pressures in the US continue to ease.

Mr. Powell’s speech yesterday at the Economic Club of Washington turned risk markets from negative to positive with most indices closing at, or close to, their highs of the day. Ahead of the speech, markets had been expecting chair Powell to double down on his recent hawkish narrative, especially after last Friday’s blockbuster US Jobs Report. Both the S&P and Nasdaq remain within touching distance of fresh multi-month highs after racking up impressive gains since the start of the year.

S&P 500 Daily Price Chart

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily -5% 1% -1%
Weekly -7% -2% -4%

Retail trader data shows 38.47% of traders are net-long with the ratio of traders short to long at 1.60 to 1.The number of traders net-long is 9.85% lower than yesterday and 6.95% lower from last week, while the number of traders net-short is 2.01% higher than yesterday and 3.68% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US 500-bullish contrarian trading bias.

Nasdaq 100 Daily Price Chart


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While Powell’s speech yesterday may have pleased the doves, there are half a dozen Fed officials slated to speak today who may turn market sentiment. Starting at 09:15 EST we hear from John Williams, followed by Lisa Cook, Michael Barr, Raphael Bostic, Neel Kashkari, and Christopher Waller.

The US dollar, in contrast to the equity market, turned lower yesterday after three days of impressive gains. The US dollar touched a one-month high on Tuesday before Powell’s appearance sent the greenback lower. The dollar remains in overbought territory, using the CCI indicator, and may drift lower still in the coming days. The next test for the greenback will come from the US inflation report that is scheduled to be released next week.

US Dollar (DXY) Daily Price Chart – February 8, 2023


All Charts via TradingView

What is your view on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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