The dollar opened today at 96.765 and has tracked lower in trade Friday morning. The dollar is encountering what appears to be significant resistance and should have a difficult time breaching its recent high 97.16 made on March 4th. The latest Fed announcement was dovish, which is bearish for the dollar. Last year, the Fed was expecting to raise rates multiple times in 2019 and now they’re forecasting rate cuts later in the year. Accelerating “dovishness” is shifting currency markets out of the dollar’s favor, as this morning we observed a lower high as the dollar entered overbought territory. Foreign currencies trade against the dollar, and we are already seeing signs of a bottom in the Japanese yen and the British pound. All of this is in line with the macroeconomic picture. Essentially, investors are reallocating funds into markets that move against the dollar as U.S. interest rates fall on questions pointing towards a decelerating economy. All eyes will be on UK Parliament today and whether they can agree to set a hardline May 22nd date for their exit or “Brexit” from the Eurozone. Any developments that point to a Brexit sooner rather than later we contend will be a net positive for the British pound. Our intermediate to longer term view is to position long the Pound and Yen vs the USD.
British Pound Weekly Chart