Dollar index hits 4-month low, deflated by dovish Fed

The dollar index remains firmly in red and holding near fresh four-month low in early trading on Thursday, following post-Fed 1.2% fall on Wednesday (the biggest daily drop since Nov 14).

The greenback was deflated by signals that the Fed’s historic policy tightening cycle is likely over, and projections show that borrowing cost would fall next year, with growing bets for first rate cut in March and expectations for 150 basis points easing in 2024.

Wednesday’s sharp fall has fully retraced 102.36/104.24 corrective leg, with break of former low at 102.36 (Nov 29) signaling continuation of a larger downtrend from 107.03/106.96 double top (2023 highs of Oct 3 / Now 1).

Daily close below 102.36 and 102.19 (Fibo 61.8% of 99.20/107.03) will be needed to confirm signal and open way towards 101.05 (Fibo 76.4%).

Bearish daily studies (MA’s in full bearish setup / 14-d momentum in the negative territory) support the notion, with corrective upticks to be capped under 102.90/103.11 zone (base of thick weekly cloud / falling daily Tenkan-sen) to keep larger bears in play and offer better selling opportunities.

Res: 102.36; 102.90; 103.11; 103.29
Sup: 102.00; 101.53; 101.05; 100.30