Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

U.S. Dollar On The Rise Again

By NAGA (Michalis Efthymiou)ForexJun 22, 2022 04:01AM ET
www.investing.com/analysis/us-dollar-on-the-rise-again-200626116
U.S. Dollar On The Rise Again
By NAGA (Michalis Efthymiou)   |  Jun 22, 2022 04:01AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The US dollar performed poorly in the last week, excluding the last 20 hours. It declined on Monday and Tuesday but now is on the rise again.

The index has increased 0.30% and the EUR/USD has declined by 38 pips during today's Asian Session. However, when we switch to weekly performance, the EUR/USD remains slightly higher due to the increase on Monday and Tuesday. So why has the EUR/USD suddenly changed its trend?

EUR/USD price chart.
EUR/USD price chart.

Comments last night from the St Louis Fed President when he advised that the US Central Bank’s actions aim to have the same impact as the 1990s rate hikes. Bullard said that the tightening of monetary policy then led to an economic contraction but also laid the foundation for serious economic growth in the second half of that decade. In other words, the regulator is attempting to slow the economy to lower demand. Investors took this as a hawkish sign that the Fed plans to continue increasing rates until it sees a significant change in the economy.

In addition, traders are preparing for the Federal Reserve Chairman’s testimony to the US Senate today anticipating further clarification on the Fed's intention. More specifically, they are hoping for an indication as to whether a further 50 basis points or 75 basis points increase in rates is likely.

Deutsche Bank CEO also spoke about the risks to the EU and US economy. He advised that a recession in both regions is likely as central banks are forced to tighten monetary policy to fight inflation aggressively. He agreed with increasing interest rates because the alternative is harsher economic conditions.

A member of the European Central Bank also commented on the risks of an “inflation psychology” in the region. According to the theory, when the consumer increases spending, trying to buy a product before the price rises, businesses raise selling prices, expecting that the demand growth will continue. This has occurred in petrol and diesel prices which has add to inflationary pressures, and fighting them through rate hikes is even more challenging.

The issue with inflation psychology and panic purchases is that it is also more challenging for businesses to determine the actual level of demand. The ECB also stated that the high level of savings has contributed to high demand even as inflation rises.

So we can see here how the fundamental picture has changed sentiment. The dollar index movement has formed a full price wave, with the last 20 hours not showing signs of a significant retracement or correction. The price has also crossed downwards to form the first “lower low” but has now approached the most recent support level. This is something traders will be looking at taking into consideration.

Disclaimer: CFDs are complex instruments with a high risk of losing money rapidly due to leverage. Many retail client investors lose money when trading CFDs with this provider.

U.S. Dollar On The Rise Again
 

Related Articles

Al Brooks
EUR/USD: Profit Taking At 2017 Low By Al Brooks - Aug 15, 2022

The EUR/USD is testing the middle of the July tight trading range following a selloff of the 2017 low. This is profit taking from 2017 low, and the pullback is deeper than the...

U.S. Dollar On The Rise Again

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email