US Dollar Index outlook: Bears take a breather but expected to hold grip while 100 barrier caps

US Dollar Index

The dollar index moves within a narrow consolidation above seven-week low and remains biased lower, following last week’s sharp fall (down 1.5% for the week).

Near-term action was so far contained by daily cloud base / 50% retracement of 97.44/101.55 / 100DMA at 99.50 zone, which provides solid support.

Daily studies are predominantly bearish (strong negative momentum / multiple MA bear-crosses) with prolonged consolidation reflecting the uncertainty over the situation in the Middle East, as media reports talk about peace talks, but traders remain very cautious.

The dollar would come under fresh pressure if peace talks succeeded (de-escalation would ease inflation risk, lower pressure on Fed for policy tightening), but stall of the most recent agreement between the US and Iran, warns that history can repeat.

Near term outlook is expected to remain bearishly aligned while the price stays below psychological 100 level (reverted to resistance and reinforced by broken Fibo 38.2% of 97.44/101.55).

Firm break of 99.50 zone supports (including trendline support at 99.43) would generate initial signal of bearish continuation, as well as reversal pattern on formation of a double-top (101.55/48) on daily chart and expose targets at 99.00 (200DMA / Fibo 61.8%) and 98.41 (Fibo 76.4%) in extension.

Caution on break of 100 barrier, though fresh positive signal would require confirmation on extension above 55DMA (101.23).

Res: 99.90; 100.00; 100.23; 100.52.
Sup: 99.50; 99.26; 99.00; 98.41.