US Dollar Index outlook: Bulls are pausing after strong rally in past four days

Slobodan Drvenica Windsor Brokers

US Dollar Index

The dollar index price edges lower on Friday, as bulls take a breather after strong acceleration in past four days pushed the price to the highest in ten weeks.

The action was boosted by renewed expectations that the Fed may keep high interest rates for longer period, to curb stubbornly high inflation and uncertainty over debt ceiling talks.

Economic data from the US, released on Thursday, further brightened dollar’s outlook as first estimation of US Q1GDP was revised higher while the number of people applying for unemployment benefits fell below expectations last week.

Talks between the White House and Republicans on raising debt ceiling and avoiding catastrophic default scenario were so far unsuccessful, but overall tone is getting more optimistic and suggesting that two sides may reach the deal ahead of next Thursday’s deadline.

Eventual agreement would negatively impact dollar bulls on sidelining strong component of uncertainty, though other factors are expected to continue to fuel bulls and partially offset potential negative impact.

Friday’s price easing could be accelerated by profit-taking after four-day rally and ahead of extended weekend due to US bank holiday.

Overbought daily studies and 14-d momentum turning south contribute to such scenario.

Near-term action is holding above initial support at 103.79 (broken Fibo 61.8% of 105.85/100.45), with extended dips to find solid ground above the top of thick daily cloud, reinforced by daily Tenkan-sen (103.15) to keep bulls in play.

Res: 104.23; 104.70; 105.30; 105.55.
Sup: 103.79; 103.47; 103.15; 102.79.

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.

EUR/USD trims losses, back to 1.1830

EUR/USD manages to regain some composure, leaving behind part of the earlier losses and reclaim the 1.1830 region on Tuesday. In the meantime, the US Dollar’s upside impulse loses some momentum while investors remain cautious ahead of upcoming US data releases, including the FOMC Minutes.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

Crypto Today: Bitcoin, Ethereum, XRP upside looks limited amid deteriorating retail demand

The cryptocurrency market extends weakness with major coins including Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) trading in sideways price action at the time of writing on Tuesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.