The dollar faced broad selling pressure following new dovish signals from Powell.

The US dollar weakened broadly on Friday following the highly anticipated speech by Fed Chair Powell at the Jackson Hole symposium. Although Powell did not specify the magnitude or pace of potential rate cuts, he reaffirmed that the Federal Reserve is likely to begin easing monetary policy, with the cycle expected to start in September.

Powell emphasized that the Fed is nearing the completion of its dual mandate, noting that inflation is steadily trending toward the 2% target and the labor market is cooling, with the unemployment rate aligning with levels consistent with stable inflation over the long term.

The market has fully priced in a 25 basis point rate cut in September, but Powell’s remarks have spurred increased speculation of a more aggressive 50 basis point cut, keeping all possibilities open.

Investors welcomed Powell’s statements, which align with the signals from the FOMC minutes released earlier this week, confirming that the time for policy adjustment is approaching. In response, the dollar index, which measures the greenback against a basket of major currencies, dropped over 0.6%, reaching its lowest level in eight months.

This fresh bearish momentum is now targeting key support levels at 100.29/18 (the December 2023 low / 200-week moving average) and the psychological 100.00 mark. A break below these levels would signal the end of a multi-month consolidation and could trigger a steeper decline.

The dollar index is on track for its largest daily loss since August 2, marking its fourth consecutive weekly decline and the biggest monthly drop since November 2022.

However, some profit-taking could occur as markets digest Powell’s message, especially with support emerging around the 100.29/00 area and considering the oversold conditions on daily charts.

Despite the dollar’s broader bearish outlook being reinforced by Powell’s dovish tone, any upward correction is expected to be limited, providing better opportunities to re-enter the downtrend. Resistance is likely to cap any rebounds within the 101.50/102.00 zone.

Res: 100.75; 101.50; 101.87; 102.61
Sup: 100.29; 100.18; 100.00; 99.20