Dollar index trades within extended range as investors await fresh direction signals

The dollar was firmer in Asian / European trading on Tuesday and partially recover Monday’s losses (down 0.36% for the day), but near-term action remains within the boundaries of recent congestion ($97.40/$98.22) as traders await fresh direction signals, mainly from the Middle East peace talks.

Technical studies on daily chart remain predominantly negative (MAs in full bearish configuration with several bear-crosses being formed / negative momentum studies) but partially countered by Friday’s long-tailed Doji candle, which points to strong downside rejection and the downside attempts being so far limited by the base of ascending and thickening daily Ichimoku cloud ($97.80).

Fresh strength eyes initial resistance at $98.20 zone (near-term range top, reinforced by daily Tenkan-sen, turned sideways) break of which to ease immediate downside risk and expose more significant barriers at $98.57 (Fibo 38.2%$100.48/$97.40), $98.82 (daily cloud top) and 98.94 (50% retracement / daily Kijun-sen.

Otherwise, the downside would remain vulnerable (particularly in case the price remains within current congestion) though firm break through cloud base will be needed to generate fresh negative signal and expose next targets at $97.30 zone (Friday’s spike low / Fibo 61.8% of $95.38/100.48 / lower 20-d Bollinger band).

However, geopolitical factor is expected to remain the main driver, with greenback to face increased pressure on scenario of positive developments in the region (continuation of the peace talks / extended ceasefire / potential peace agreement) that would reduce demand for safe haven dollar, ease fears of stronger inflationary pressure = change of Fed’s recent narrative of need for policy tightening and make the dollar less attractive for investors.

Res: 98.15; 98.30; 98.52; 98.82
Sup: 97.91; 97.50; 97.75; 97.31