U.S. Dollar Advances After Powell Affirms Gradual Rate Hikes

The U.S. dollar firmed against its key counterparts in the European session on Tuesday, as new Federal Reserve Chairman Jerome Powell reiterated the central bank's view that further gradual increases in interest rates would be appropriate to attain objectives of maximum employment and stable consumer prices. "In the FOMC's view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives," Powell said in his prepared remarks. "While many factors shape the economic outlook, some of the headwinds the U.S. economy faced in previous years have turned into tailwinds," he said. 

He added, "In particular, fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory." Powell also said financial conditions remain accommodative despite recent volatility and highlighted strong consumer spending and job growth. Data from the Commerce Department showed that U.S. durable goods orders pulled back more than expected in January. 

The Commerce Department said durable goods orders plunged by 3.7 percent in January after surging up by a revised 2.6 percent in December. Investors await the conference board's Consumer Confidence report for February due at 10.00 am ET. The consensus is for 126.4, slightly up from 125.4 in January. At 2:00 pm ET, the former Federal Reserve chairwoman Janet Yellen will be interviewed by Ben Bernanke, her predecessor at the Fed, at Brookings Institution in Washington, D.C. 

The greenback fell against its major opponents in the Asian session, with the exception of the pound. The greenback spiked up to a 5-day high of 107.23 against the yen, compared to 106.91 hit late New York Monday. The greenback is likely to find resistance around the 110.00 level. The greenback that closed yesterday's trading at 0.9379 against the Swiss franc climbed to a 5-day high of 0.9393. The greenback is seen finding resistance around the 0.95 mark. Reversing from an early low of 1.2346 against the euro, the greenback edged up to 1.2287. On the upside, 1.215 is seen as the next resistance level for the greenback. 

Survey data from the European Commission showed that Eurozone economic confidence dropped to a 3-month low in February. The economic sentiment index fell to 114.1 in February from 114.9 in the previous month. This was the lowest since last November but slightly above the expected score of 114. The greenback remained at a 2-day peak of 1.3912 against the pound, up from a low of 1.3996 seen at 3:15 am ET. 

Continuation of the greenback's uptrend may see it challenging resistance around the 1.38 region. The greenback strengthened to a 5-day high of 1.2733 against the loonie, 4-day high of 0.7820 against the aussie and near a 2-week high of 0.7258 against the kiwi, off its early lows of 1.2668, 0.7869 and 0.7305, respectively. The next likely resistance for the greenback is seen around 1.29 against the loonie, 0.77 against the aussie and 0.71 against the kiwi.