Dollar loses traction after 200DMA capped recovery
The dollar index slipped on Wednesday, reversing bounce of past two days, after it repeatedly failed to clear strong resistance, provided by 200DMA (105.57).
Overall bearish daily studies maintain downside pressure, with stall of short recovery, pointing to likely scenario of limited correction before larger bears resume.
Although fundamentals are getting mixed for the dollar, deflated since October by speculations that the Fed would slow pace of its aggressive policy tightening, as the latest economic data signal that the US economy remains quite robust and less harmed from strong rise in interest rates, than initially anticipated.
On the other hand, investors remain cautious about weakening global economic outlook and signs that the most of Western economies are heading into recession, which would boost dollar’s safe-haven appeal.
Near-term action is expected to remain biased lower while capped by 200DMA, with firm break of cracked previous low at 104.49 (Aug 10) to signal continuation of the downtrend from 114.72 (Sep 28 peak) and expose targets at 102.11 (50% retracement of 89.50/114.72) and 100.00 (psychological) in extension.
Only sustained break of 200DMA would put bears on hold for stronger correction.
Res: 105.57; 106.16; 106.57; 107.13
Sup: 104.80; 104.05; 103.18; 102.11