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What Will Powell Do For USD?

June 29, 2023
Frank Cabibi

After the Fed's most recent meeting, the USD has been in a bit of a mix. Meanwhile, the ECB and BOJ had released their own statements on monetary policy going forward. We'll take a look at three different pairs and what could happen as we end the week.

EdgeFinder Analysis

Australia is getting trampled by the dollar as the EdgeFinder scans in this pair at -6 strong sell. We got a majority long bias from the crowd while COT does just the opposite. Both countries have similar unemployment levels however starch differences in GDP. The dollar beats the buck in every category except inflation and undmeployment.

One thing we can take away form the Fed meeting yesterday is that investors expect at least one more rate hike by the end of this year. The consensus target is 5.6%. Meanwhile, AUD's recent CPI numbers came out lower than expected, which may prompt the RBA to be less aggressive on interest rates going forward (a pause or cut at next meeting).

Because of the positive GDP news in the US, gold's price sank lower today. The US also saw a decline in the number of unemployment claims this week. Any good economic news is going to squash sentiment for the bulls on this metal.

However, smart money is buying into this move lower. Granted, we don't have this week's data yet, but last Friday showed a bullish flip from COT. If this continues into next week, we could see price find support around the $1,880s and hold here.

EURJPY is pretty cut and dry when it comes to which direction traders are looking to trade in. The pair is very divided in terms of fundamentals. What we can tell for the most part is that the ECB will be more hawkish towards the euro, and as discussed above, the yen will ultimately remain dovish.

EUR also remains bullish on the COT side. JPY is the most shorted asset on the EdgeFinder, and this is nothing new. It's a very obvious sentiment toward the yen which has been consistently losing value over time compared to the other currencies.

Retail Spotlight

Retail is mixed here on the USD. They seem to be bullish on commodities for the most part. Against the dollar, they are less bullish euro.

Smart Money Spotlight

One thing hurting gold's bullish bias is that the divergence in USD and gold sentiment significantly decreased from last week. It appears that both gold and dollar are just about equally long from smart money. We will have to see a decrease in longs for the dollar and an increase in the metal this Friday.

Fundamental Spotlight

US sees the most growth in expansion than EUR and JPY. The Fed and ECB are going to raise rates, according to predictions on either bank. Meanwhile, Japan is likely going to stick to low interest rates. So, as both EUR and USD remain hawkish, the yen looks dovish overall.

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