USD continues to slip as Trump’s attacks on Powell, threaten the Fed’s independence

The USD renewed its bearish tendencies against its counterparts as besides the uncertainty caused by Trump’s trade wars, the US President is now openly attacking the Fed Chairman as well. Fed Chairman Powell has expressed his doubts for the necessity of extensive rate cutting in the face of the possibility of higher prices, given the US President’s tariff policy. On the flip side, the US President wants monetary policy to ease substantially in order to boost consumption and production levels. The issue goes further as should the Fed keep rates high or fails to reduce them substantially the US government may have to provide a boost to the US economy on a fiscal level, by increasing the national debt or refraining from reducing corporate taxes. Fed Chairman Powell had expressed his intention to serve his term until the end and the US President is increasingly looking for ways to terminate his term while at the same time, US President Trump is increasingly attacking the Fed Chairman on social media, either by calling him a loser or asking for his resignation, thus setting into doubt the independence of the Fed as a whole. The issue tends to increase the bearish tendencies of the USD and any further escalation on Trump’s behalf could intensify the USD’s bearish movement.

In the FX market we note the rise of EUR/USD as the pair broke the 1.1480 (S1) line now turned to support reaching pandemic levels. Overall we maintain a bullish outlook for the pair as EUR/USD’s upward movement intensified over the past two weeks. We note that the RSI indicator remains just above the reading of 70, signalling on the one hand the strong bullish sentiment of the market for the pair, yet at the same time also implying that the pair is at overbought levels and is ripe for a correction lower. Should the bulls maintain control over the pair we may see EUR/USD aiming if not breaching the 1.1690 (R1) line and the next possible target for the bulls could be set at the 1.1905 (R2) level. A bearish outlook currently seems currently remote and for its adoption we would require the pair to drop breaking the 1.1480 (S1) and the 1.1210 (S2) lines and continue to also break the upward trendline that had been formed since the 28th of February, signalling an interruption of the upward movement and then continue to drop testing the 1.0940 (S3) barrier.

US stock market indexes corrected a bit higher in today’s Asian session, yet the bearish tendencies are obvious with market worries for a possible recession in the US economy continuing to be present. We see the case for the turmoil on a political level to continue which in turn may increase the risk-averse effect on the market. On the other hand, gold’s price continues to rise fueled by safe-haven inflows and the renewal of the weakening of the USD reaching new record highs briefly testing the $3500 per ounce level.

Gold’s price continues to rally and yesterday broke the 3400 (S1) resistance line, now turned to support and continued to rise testing the 3500 (R1) resistance level. We maintain our bullish outlook for the precious metal’s price, yet its clear that it’s at overbought levels as the RSI indicator is clearly above the reading of 70 and the price action is above the upper Bollinger band. Hence we issue a warning for a possible correction lower of gold’s price. Should the bulls maintain control over the gold’s price we may see it breaking the 3500 (R1) resistance line, with the next possible target for the bulls being the 3600 (R2) resistance level. Should the bears take over we may see gold’s price breaking the upward trendline guiding it, and continue to break the 3400 (S1) support line and test the 3300 (S2) support level.

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In today’s European session, we get Sweden’s unemployment rate for March. During the American session we get Canada’s producer prices rate for March and the Eurozone’s preliminary consumer confidence figure for April. In tomorrow’s Asian session we note Australia’s and Japan’s preliminary manufacturing PMI figures both for the month of April. On a monetary level, we note the speeches by ECB member Knot, Philadelphia Fed President Harker and BoE Deputy Governor Breeden.