US dollar price forecast September 17 2020

2020-09-17

Dollar scared the doves. Forecast for 17.09.2020Dmitri Demidenko

As expected, the [EURUSD][1] pair reacted to Jerome Powell’s speech. I will sum up the outcomes of the Fed’s meeting. At the end of the article, I will offer a plan to trade [EURUSD][1] today and this week.

Fundamental US dollar forecast for today

Everything is relative. When the Fed started hiking the interest rates in 2015, the FOMC officials expected the unemployment rate to reach 5% and the inflation rate to be below its 2% target in the next three years. Currently, the US central bank expects to see the unemployment level at 4% in the long run. However, the Federal Reserve is not willing to raise the federal funds rate even is the PCE exceeds 2%. Five years ago, the Fed was proactive. At present, the central bank is willing to wait patiently until the US economy recovers. The Fed’s stance has become more dovish than it was earlier. Nonetheless, Jerome Powell, speaking at the press conference after the FOMC September meeting, hasn’t said anything new compared to his speech in virtual Jackson Hole. As a result, the dollar has strengthened.

The Fed doesn’t seem to worry about the dollar strengthening, at least not as much as the ECB worries about the euro appreciation. The central bank has suggested more positive forecasts for the US GDP (from -6.5% to -3.7%) and unemployment (from 9.3% to 7.6%) in 2020. Jerome Powell has claimed that the US economy has been recovering faster than expected during the last 60 days. Ahead of the FOMC meeting, the [EURUSD][1] bulls were concerned about the projections for the federal funds rate hike before 2024 and the lack of transparency in the Fed’s average inflation targeting plan. The concerns have become a reality. Four FOMC officials expect the tightening of the monetary policy in 2023, one committee member says it will occur already in 2022.

FOMC projections for the federal funds rate

Source : Bloomberg

So, it is natural that the [EURUSD][1] bulls are discouraged after Powell’s speech. The Fed’s Chair has announced that the Fed should maintain the interest rates low until the labor market reaches the full employment level and the inflation moderately exceeds 2%. Powell has said nothing new compared to his speech in Jackson Hole. The attempts to clarify the new strategy failed amid the disputes among the FOMC members. Some officials said they wanted more clarity about the economic outlook before implementing the new policy course; Robert Kaplan and Neel Kashkari openly opposed it.

When the markets do not get what they want, investors’ disappointment results in selloffs. The EURUSD correction is no exception. Moreover, the dollar is supported by Donald Trump’s calls to the Conservatives for the fiscal stimulus boost. The stalled negotiations on the new financial aid package hinder the US GDP recovery, which is clear from the retail sales data.

Dynamics of US retail sales

Source : Financial Times

Democrats insisted on the additional aid of $3.5 trillion, next, they agreed to accept $2.2 trillion. Treasury Secretary Steven Mnuchin spoke about $1.5 trillion. The US president hopes to settle down this issue, which should support the US GDP recovery and send the [EURUSD][1] down.

[EURUSD][1] trading plan today

I recommend holding the EURUSD sell trades entered at the [breakout of level 1.1795][2]. If the pair breaks through the September low close to 1.1745, it will be relevant to open new sell positions. The targets are the levels of 1.162 and 1.1595.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

I recommend trying to trade with a reliable broker [here][3]. The system allows you to trade by yourself or copy successful traders from all across the globe.
Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][4] your trading account.
Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Rate this article:

( {{count}} {{title}} )