Unveil Reasons of USD Bounced up After Releasing Federal Reserve Board Minute

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wisepowder

Age: 2021
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The US Dollar Index bounced up by around 1% after releasing the minute of Federal Reserve Board on 19 Aug, breaking the record high since this
March. The minute shows that the board tends to adopt more dovish
approach in monetary policy. Yet, Why did the US Dollar Index make such a
big bounce-up, driving those non-US dollar or even precious metal
down?To get more news about WikiFX, you can visit wikifx official website.
According to the minute of Federal Reserve Board, some of the committee members
of FOMC agreed to adopt the further easing monetary policy to cope with
the negative impact bought by COVID-19; however, traders were
disappointed and started to have short covering of USD immediately,
driving USD rise a lot.
I believe traders have already predicted and short USD ahead of releasing of minutes; and, they short cover the USD
afterwards. It perfectly demonstrates the famous Wall Street‘s buying
strategy – “Buy on rumor, sell on fact”. Meantime, the minute also
reflects that the officers of the Board won’t set the upper limit or
target return for US bonds to secure the position of USD. It drives
those “extreme” dovish party disappointed and shows Federal Reserve
Board has no further measures on easing monetary policy. Thats why some
may interpret as the start of hawk signal instead of dove.

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I agree the Federal Reserve Board intends to adopt more dovish approach
to pave the way for adopting further easing monetary policy in future.
Since the minute keeps on telling negative towards economy, it drove
both DJ index and Nasdaq index drop simultaneously after hitting the
record high. With the divergence works between USD and stock; USD index,
therefore, increases drastically after releasing of minutes.
Many has talked about the huge short covering of USD, which showed the signal
of bouncing up after touching the bottom. Whilst some said this is
merely a technical adjustment and will have further drop afterwards. I
do think the probability of both scenarios are equal; yet I realize USD
dose not have much room for further drop, expecting a strong supporting
level around 91.90. Two focusing events may affect the trend of USD - i/
the economic platforms of democratic party proposed by US president
candidates Joe Biden and Kamala Devi Harris; ii/ the announcement of
Jackson Hole in the Central Bank annual meeting and the market
expectation - the new and innovative strategy of easing monetary policy
by Powell, the chairman of Federal Reserve Board. If it turns negative
and has no new ideas, USD index will be expected to boost up again.
Technically, USD has a strong resistance level at around 94, with 3 times strong
selling signal recently, making USD index hard to have another
breakthrough. It is estimated to be positive if USD index breaks the 94
level and takes this as the USD reference point.

Posted 27 Oct 2020

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