GOLDWELL

The dollar is under pressure in the foreign exchange market following the Fed's dovish tone last night. While some observers may have expected an announcement of a future reduction in asset purchases, the FOMC statement did not mention a reduction in purchases which will continue to be in the range of $120 billion per month.

Fed Chairman Jerome Powell said that the labor market has a long way to go before the time comes for the Fed to withdraw its support measures for the economy.

The Fed should therefore wait for a few more employment reports before it eventually withdraws its support measures.

At the earliest, the Fed could announce a reduction in asset purchases at the next FOMC meeting in September, provided that the monthly employment reports for July and August are very strong. If not, the Fed should continue to be patient, and a reduction in asset purchases before December would be unlikely.

Market participants are now awaiting the advance release of the U.S. second-quarter GDP. The consensus is for 8.5% annualized growth versus the 6.4% GDPNow indicator developed by the St. Louis Fed.

In terms of technical analysis, the DXY price confirmed its bearish reversal yesterday following the Fed. The DXY broke out of its ascending wedge at the bottom, paving the way for a retracement.

The first major support to watch will be the former May resistance broken in June at 91.41 points. Note that this support is reinforced by the presence of the 50% Fibonacci retracement threshold around the 91.5 handle

(Chart Source: Tradingview 29.07.2021)

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.

In case of a pullback below this threshold, the bearish outlook would be extended to the symbolic threshold at 90 points.

Conversely, the bearish outlook would be invalidated in the event of a rebound above the recent high at 93 points.