Dollar index – bulls may pause for shallow consolidation before attacking key resistances

The dollar index eased from new highest in almost three months in early Monday, as traders collected some profits and fresh risk appetite also weighed on dollar.

The Fed Chair Powell’s speech in Jackson Hole symposium was mainly in line with expectations, signaling that the US central bank keeps overall hawkish stance on interest rates.

In his remarks, Powell signaled that the Fed left the door open for possible further rate hikes, as inflation is still high, although with significant progress in easing price pressures, while the economy remains surprisingly strong despite high borrowing cost.

However, Powell said that the next steps of the central bank will be data dependent and economic conditions will strongly influence future decisions whether to raise interest rates or to hold the policy unchanged.

Markets widely expect the Fed to stay on hold in September, with rising bets for another 25 basis points hike in November’s policy meeting.

The fact that the central bank is likely to keep rates elevated for longer, with further increases not ruled out, is positive for greenback, which advanced for six straight weeks since mid-July.

The price came close to key resistances at 104.59/74 (May 31 peak / 55WMA), where larger bulls are expected to take a breather and consolidate.

Overbought daily studies contribute to such scenario, with limited dips to be ideally contained by rising 10DMA / broken Fibo 76.4% at 103.51/32 zone and keep larger bulls intact.

Only acceleration through 200DMA (102.92) would weaken near-term structure and risk deeper pullback.

Traders shift their focus on a series of important US economic data due this week, with releases of Q2 GDP, core PCE, consumer spending and labor report, to give further details about the situation in the US economy.


Res: 104.37; 104.59; 104.74; 105.40
Sup: 103.91; 103.51; 103.32; 102.92