Dollar Index eyes Powell testimony, 4h 20-MA is still resistance

• Upside in dollar index is being capped by 4h 200-MA.
• Powell likely to sound optimistic, but offer little cues on rate hike plan. 

The dollar index (DXY), which tracks the value of the greenback against the basket of currencies, failed to take out the 4-hour 200-MA (moving average) in early Asia and now trades on the back foot at 89.70. 

The DXY has had a tough time holding onto gains above 90.00 for the last three straight days, while the downside has been capped around 89.60. The narrow trading range could end with an upside breakout if new Fed Chair Powell confirms that 3 to 4 hikes may be necessary this year. 

However, the consensus is that Powell will likely sound optimistic, but at the same time will refrain from saying anything (on interest rates) that would destabilize bond markets and push USD higher. Kathy Lien from BK Asset Management believes, "Powell would not want to see stocks crash, yields spike, and the dollar soar so he'll strive to maintain continuity and limit market volatility". She adds further, "there's still a decent amount of time to shape expectations ahead of the March meeting where he's expected to deliver this year's first Fed hike."

Dollar Index Technical Levels

A daily close below 89.48 (10-day MA) would indicate the corrective rally has ended and would open doors for re-test of 88.55 (Feb. 1 low) and 89.25 (Feb. 16 low). On the other hand, the violation at 90.00 (psychological hurdle) would shift attention to 90.57 (Feb. 8 high) and 90.83 (50-day MA).