Powell’s testimony could be source of US dollar volatility

The US dollar is trading higher against a basket of major currencies early Wednesday as the crisis in Ukraine continues to put pressure on the heavily weighted euro and pound sterling. The dollar is also trading higher against the Japanese yen, but lower against the Canadian dollar. Against the safe-haven Swiss franc, the dollar is trading flat.

At 06:17 GMT, March US Dollar Index futures are trading at 97.470, up 0.064 or +0.07%. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $26.06, up $0.18 or +0.70%.

The greenback is also supported by an uptick in U.S. Treasury yields as investors prepare for testimony from Fed Chairman Powell in Congress on Wednesday and Thursday for any indication of whether the Russian-Ukrainian conflict will affect US markets. central bank plans to tighten monetary policy.

Prior to Powell’s testimony, market volatility appeared to have encouraged some traders to reverse their expectations of a 50 basis point rate hike. On February 10, the chance of this happening was around 80%. Today, the chances are almost nil.

March US Dollar Daily Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 97.735 will signal a resumption of the uptrend. A move through 95.650 will change the main downtrend.

The index is trading inside last Thursday’s wide range, reaching its 50% level at the support of 96.995.

The minor range is 95.650 to 97.735. Its 50% level at 96.695 is additional support.

The short-term range is 95.145-97.735. Its 50% level at 96.440 is the key support.

Daily Swing Chart Technical Forecast

The direction of the March US Dollar Index on Wednesday will likely be determined by how traders react at 96.995.

Bullish scenario

A sustained move above 96.995 will indicate the presence of buyers. If this continues to generate enough bullish momentum, expect a possible push to last week‘s high at 97.735. This is a potential trigger point for an upward acceleration with 98,500 the next likely target.

Downside scenario

A sustained move below 96.995 will be a sign of weakness, but sellers will struggle at 96.695 and 96.440. The latter, however, is a trigger point for an acceleration downside with the next target at 95.650.

Even if the main trend turns lower, the 95.470 retracement zone at 94.930 should provide support.

Secondary notes

Fed Chairman Powell could cause some volatility on Wednesday if he tells Congress that policymakers may consider postponing any rate hikes at its March 15-16 meeting if the situation in Ukraine worsens or if Russia was bringing the fight to American soil.

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