Signal of deeper fall on monthly close below broken pivotal Fibo support
The dollar index is in directionless near-term mode and trading within a narrowing, triangular range, but overall picture remains bearish.
Daily studies are in full bearish mode, weekly chart shows strengthening bearish momentum, but moving averages are in mixed setup, while bullish structure on monthly chart is weakening.
The greenback was up around 8% overall in 2022, mainly driven by the actions of the US Federal Reserve, but also as safe-haven, due to rising geopolitical and economic uncertainty.
The dollar strongly appreciated on the gap between the Fed and other major central banks, as the US policymakers were the first to start tightening monetary policy to fight soaring inflation, while other central banks stayed on hold for some time.
Further support to the US currency came from aggressive rate hikes by the Fed, but more dovish tones from the US policymakers in last three months prompted traders to collect profits from their larger long positions that deflated dollar.
Pullback from new 20-year high at 114.72 (Sep 28) in past three months shows no significant signs that corrective phase is over, but shows that downside remains at risk, as bearish signal is developing on monthly chart, following break of pivotal Fibo support at 105.09 (38.2% retracement of 89.50/114.72 rally, reinforced by 10 MMA).
Monthly close below this level would add to negative signals and keep focus shifted lower, with targets at 102.11/100.00 (50% retracement / psychological) coming in focus.
Traders will continue to focus on the actions of the central bank, but also the economic picture, as the US economy is at the edge of recession, due to negative impact from high interest rates to economic growth.
The dollar’s direction will be also strongly influenced by the main components of dollar index – Euro and Japanese yen.
Near-term action should stay capped by broken Fibo barrier at 105.09 to remain bearish, though bias would remain negative while potential stronger upticks remain below 200DMA (105.97).
Res: 104.12; 104.43; 105.09; 105.78
Sup: 103.68; 103.38; 103.06; 102.11