Dollar index: bulls gain traction but recovery likely to be limited

The dollar index keeps firm tone and pushing through psychological 100 barrier again, after Wednesday’s spike higher failed to register close above this level.

Recovery from 2.9% drop in past two weeks (which accelerated on cooler than expected US inflation data and added to expectations that the Fed may end its tightening cycle soon) gained traction on Wednesday, after holding within narrow consolidation, shaped in a triple-Doji.

Fresh strength faces minimum requirement on break through 100.00/33 zone (psychological / falling 10DMA) to generate initial reversal signal, which will look for verification on lift through 100.75 (Fibo 38.2% of 103.25/99.20 bear-leg).

On the other hand, optimism is likely to be limited, as dollar remains weighed by improving US rate outlook and fading possibilities that the economy may enter recession that prompts investors into riskier assets.

Overall bearish daily studies (strong negative momentum and MA’s in bearish configuration) support scenario of limited correction (ideally to be capped under 103.75 Fibo barrier) ahead of fresh push lower and attack at pivotal Fibo support at 98.92 (61.8% retracement of 89.15/114.72 2021/2022 uptrend).

Res: 100.33; 100.45; 100.75; 101.23
Sup: 99.77; 99.20; 98.92; 97.72