US Dollar Index outlook: Bears pressure key support zone and risk deeper fall on break

Slobodan Drvenica Windsor Brokers

US Dollar Index

The dollar index remains at the back foot on Monday and pressuring key supports at 103 zone (lows of mid / late Dec, where a temporary base has formed) after strong fall on Friday (down 1.1% for the day).

The dollar came under increased pressure after US labor data signaled that the Fed may further ease its stance on interest rates, while China’s further easing of strict Covid policy, added to improving risk sentiment.

Daily studies returned to bearish configuration, contributing to weakening tone, though fresh bears need to register a clear break of 103 support zone, which would also confirm penetration into rising weekly cloud (top of the cloud lays at 103.64) and signal continuation of the downtrend from 114.72 (2022 high, the highest since 2002) which paused for consolidation in past two weeks.

Sustained break of 103 zone pivots (also bull-trendline off 89.50, May 2021 low) would risk drop towards 101.94 (50% retracement of 89.15/114.72 ascend), 100.44 (weekly cloud base) and 100 (psychological).

Initial resistances at 103.95 (10DMA) and 104.11 (20DMA) should ideally cap, but extended upticks should not exceed 105.41 (Friday’s high (Fibo 23.6% of 113.02/103.06) to keep larger bears intact

Res: 103.95; 104.11; 104.52; 105.41.
Sup: 103.06; 102.63; 101.94; 100.44.

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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