A dovish tone from Fed Chairman Powell led to an USD sell-off overnight. Powell commented that interest rates are "just below" neutral. In the short-term, the Dollar weakness may persist, as speculators price in a slower rate path of the Federal Reserve.
EUR/USD managed to break above the descending channel from the mid-November high, which signals that an extension of the rally towards 1.15 could follow soon. However, Euro bulls have still a lot to worry about - from the Italy crisis to a slowdown of the Eurozone economy. The recovery might therefore be limited.
The GBP/USD chart shows a double bottom pattern at 1.2725 support. A clear break above 1.2925 resistance would confirm this and pave the way for a recovery rally. Nevertheless, since there is still a lot of uncertainty around the Brexit deal, traders should remain cautious.
The dovish statements from the Fed Chairman could fuel the recovery rally in US equities. The S&P 500 already managed to gather some momentum in the past days and should soon approach the 200 DMA around 2760. A clear break above that line would be a positive signal for equity bulls and pave the way for a recovery to at least 2830.
Meanwhile, when looking at the chart for USOIL, it is worth repeating the old phrase "don´t try to catch a falling knife". While USOIL is heavily oversold in the near-term, there is still no sign of a recovery near. The commodity continues to struggle, and speculators remain nervous ahead of the OPEC meeting. Until there is more clarity regarding the organization’s strategy, USOIL will remain highly volatile and likely to continue its downtrend.
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Stocks recover as Fed Chair Powell says, "The job is not done"; Oil's raging bull and FX's roaring commodity currencies