US dollar index – bulls are pausing after strong rally in past four days

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