The dollar index seems to be on the verge of decisive levels, and the question on everyone’s mind is if it will break or not.
In recent news, the dollar stood to nearly a 2-month high on Friday and speedily headed towards its third weekly gain. This occurred on the expectation of the fact that US interest rates could be higher for longer than initially expected.
This has also occurred alongside the tensions of raising the debt ceiling. Several concerns persist on the debt-ceiling negotiations that took place over the past few days between US President Joe Biden and top congressional Republican Kevin McCarthy. With a week to go towards the deadline of June 1, what would be the fate of the dollar index?
The FDI will begin cutting rates this year and has been scaled back quite a lot.
Recent data released on Thursday revealed that the number of American citizens filing new claims for unemployment benefits increased at a moderate pace last week to 229,000 lower than expectations.
Technical Outlook:
Since 1 February 2023, the U.S. dollar has bottomed out and enjoyed its recovery rally. The currency gained more than 2.50% since the start of the month. Yesterday, it closed at 104.211, up 0.31%. Trading at two months high.
The dollar index which tracks the greenback against a basket of six other currencies has turned positive from the support of 100.42 and recently made a high of 104.2450, just near to mid march high.
On the above chart, dollar index trading is in a descending triangle pattern, however, the pattern is not completed. As the currency has been trading between short-term consolidation zones.
A Descending triangle is a chart pattern that technical analysts use to create a trend line. This phenomenon depicts a bearish chart pattern. However, in several circumstances, the descending triangle could be bullish as well when it breaks out in the opposite direction. This type of pattern is known as a reversal pattern.
On the upside, a massive resistance is seen at 104.75 and on the downside, crucial support is seen at 100.95. Either side break will confirm a nearly 1%-2% move.
A break above 104.75, will appear to test the first project level at 105.85. Further, If it breaks and sustains, then the dollar index appears to test 107.50 next projected level.
Alternatively, failure of the break will create a probability for a short-term dip, and the dollar index may test its first immediate support of 102.20- 101.50 again.