On Thursday the 21st of March, trading on the US dollar index closed up. The DXY completely recovered Wednesday’s losses, which were incurred after the Fed’s interest rate decision and subsequent monetary policy statement along with Jerome Powell’s press conference.
This significant correction was driven by the pound’s collapse. The pound came under pressure over fears that the UK could leave the European Union without a deal. All eyes are now on the European Union, who must now approve a departure date for the UK.
The bulls were unable to keep up their defence of 1.1410. The pound’s collapse took its toll on all the major currencies. Although the single currency got some support via the EURGBP cross, the bulls were still forced back to 1.1343. Markets completely ignored the Bank of England’s meeting.
The bears have completely pared Wednesday’s gains, forming a bearish engulfing on the daily timeframe. This is a bearish candlestick pattern, and since the 1.1336 low wasn’t broken through, the bulls could have brought the rate back up to 1.1423.
As today is Friday, the upwards correction is limited to 50% (1.1403) of the large candlestick from the 20th of March. Yesterday, this level acted as a key support for the bulls, as anyone who opened a long position above this level suffered losses. The drop intensified as traders closed their long positions.
The pound is showing decent growth today. We’re keeping an eye on Brexit news. Barring any negative headlines from the UK or EU, the euro could gather some momentum. We’ve had a lot of swings this week thanks to the FOMC and Brexit.