U.S. dollar slipped from a two month high, and settled down by 0.70%. That is the biggest weekly loss since mid January 2023 against a basket of six major currencies. As traders stepped back to gauge the path for Federal Reserve policy.
The dollar index, which measures the greenback’s value against six major currencies, fell 0.70% to 104.527. From the weekly high 105.359, its strongest level since January 6, 2023.
The greenback pared losses after data showed the U.S. services sector grew at a steady pace in February. With new orders and employment rising to more than one-year highs. The Institute for Supply Management’s (ISM) non-manufacturing index dipped to 55.1 from 55.2 in January.
Next week job opening, non farm payrolls reports and Fed testimony will bring some volatile momentum in the dollar. Traders are likely to move cautiously, particularly in currencies exposed to more dovish local central bank messaging. Namely the Aussie, Canadian dollar, and yen.
The Bank of Japan (BOJ), meanwhile, is expected to start dismantling extraordinary stimulus measures after Governor Haruhiko Kuroda retires next month.
Tokyo inflation data for February exceeded the BOJ’s target for a ninth month. But the core measure did decelerate from a 42-year high.
The U.S. dollar paused its four week rising trend. It retreated from the weekly high 105.359 and made a low 104.094 before closing at 104.527.
Since 30 January 2023, the dollar has gained more than 2.20%. Greenback continued in upside from the low 100.820, to recent week high 105.359.
On the weekly chart, the dollar is still trading at its 23.6% Fibonacci Retracement level. Further, MACD is on the verge of a positive crossover. Both are indicating bullishness in the near future.
It’s expected that any dip towards 104.10-104.20 will create a probability for bounce back. Currency will expect to retest 104.80-105.55 very soon.
Alternatively, on the downside a break below 103.75 only could witness some correction. And it may test 103.55-103.25.