The US dollar has fallen pretty significantly during the trading session here on Friday, testing the 50-day EMA.
USD/CHF
The US dollar has fallen pretty significantly during the trading session here on Friday, testing the 50-day EMA. The 50-day EMA is an indicator that a lot of people are typically watching as technical traders, and it has offered support over the last couple of days.
The US jobs report was an absolute disaster on Friday, and that sent the US dollar lower, but I find it interesting we’re still very much in the same consolidation range. So the question then becomes, what really changed? And I anticipate that, at least for now, the answer’s not much. In fact, we’ve even bounced a bit from the 50-day EMA in a sign of resiliency.
Strait of Hormuz Risks and Interest Rate Differential
Interest rates have dropped as you would expect. Everybody’s celebrating the idea of the Federal Reserve riding to the rescue and cutting rates, but will they? And the problem, of course, is going to be that it’s not just the economic numbers that could have the Federal Reserve involved. It’s the fact that inflation may come via energy.
If the Strait of Hormuz remains closed for a significant amount of time, that will drive up energy prices. Although the United States is somewhat insulated to that, at least directly, it drives up the global cost of energy, and then foreigners come and buy Light Sweet Crude oil that they would not necessarily run to previously. There are other forms of crude oil that will be hit a little bit further down the road and down the chain, and, of course, will have an influence on global supply chains.
So that’s the real scare here, and as we go into the weekend, we have no idea what the Middle East has in store for us. We are hanging around again the 50-day EMA and the 0.81 level, both of which could attract a certain amount of attention anyways. The interest rate differential, despite the fact that the US rates dropped a little bit during the session, are still a mile wide between these two currencies. Quite frankly, I like holding the dollar at this point.
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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
