US Dollar Index outlook: Keeps firm tone in expectations of Fed's further hawkishness

US Dollar Index

The dollar keeps firm tone and hit new multi-month high early Wednesday, after surging 0.56% on stronger than expected US data on Tuesday.

US employment cost index rose more than expected in the first three months, adding to signs of inflationary pressure, which added to the factors that cool expectations about timing and magnitude of Fed rate cuts.

Markets await release of a series of key US data this week (Fed rate decision, ADP, JOLTS and NFP labor report) which will provide more information to US policymakers and influence their future decisions.

Hawkish Fed’s stance at the end of two-day policy meeting would add to signals that the central bankers are not in hurry to start cutting rates before having a clear picture about inflation and condition of the economy and will offer further support to the greenback.

Technical picture on daily chart remains firmly bullish and contributes to dollar’s overall bullish stance, as bulls cracked former top at 106.31 (Apr 16), with clear break here to open way for acceleration towards key med-term targets at 106.96/107.03 (Nov 11 / Oct 3 tops, respectively).

Rising 10DMA (105.82) offers initial support, guarding lower pivots at 105.38/25 (20DMA / Apr 26 low), where deeper dips should find firm ground to keep larger bulls intact.

Res: 106.36; 107.00; 107.88; 108.62.
Sup: 105.82; 105.38; 105.25; 105.00.