USD and Euro Trading into Important Levels, will the Greenback Pop?

The USD and Euro are both trading into important resistance and support levels. From a top-down approach, there has been a clear divergence between the Euro and USD markets, a development that has seen the financial market go round in circles. Technically, traders are watching out how the USD price action will pan out in the next few weeks. With the Euro cooling off after stretching the greenback in the last few months, whether prices will retrace from their multi-month high and feed USD bulls would determine how commodities will fair. This will subsequently influence the performance of the AUD and NZD.

Details:

There is conflicting news that supports and simultaneously tears down USD's props. The recent FOMC meeting is an example. While Jerome Powell predicts a modest increment in inflation, he couldn't discount the coronavirus's effect on the economy. The FED isn't going to reduce their bond purchasing or slow down QE. This is even with their admission that inflation could rise, wiping out purchasing power. Still, theUSD gainedin the NY session as stocks rallied. Earlier on, the DOW fell to a three-month low amid concerns that speculators driving GSE stock would be met by regulators. Additionally, the resulting short and gamma squeezes might force some hedge funds to close shop, cascading into liquidation of other investments, causing the USD to appreciate as risky bets are unwound. 

Impact on the USD:

Neutral. The USDX is range bound and reaction at key resistance/support levels—depending on the time frame, can either lead to more disintegration or a lift-off. Regulator intervention in the stock market, the risk around GSE stock, and the FED stance in QE converge with a minimum net impact on the USD.

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