Dollar index witnessed a speculative plunge yesterday, it dropped more than 1%, the biggest fall since 1 February 2023. Currency dropped below 20 February 2023 low. As after U.S. authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank. That created a hope that Federal Reserve will be less aggressive in raising interest rates to curb inflation
President Joe Biden said the administration’s swift actions on Sunday to ensure depositors can access their funds in SVB. And Signature Bank should give Americans confidence that the U.S. banking system was safe.
The Fed on Sunday announced it would make additional funding available through a new Bank Term Funding Program. Which would offer loans of up to one year to depository institutions. Backed by Treasuries and other assets these institutions hold.
The dollar index, which measures the dollar against six other currencies, fell 1.03.% as short dated Treasury yields tumbled.
The two-year note’s yield plunged 48.9 basis points to 4.099% in the biggest one day drop since the financial crisis of 2008. The note was on track for its biggest three day decline since the Black Monday crash of 1987
Technical View
Intraday price action resulted in formation of a long bearish candlestick. Which is indicating a strong selling pressure in the dollar index. Further, currency found support of 50 SMA on the daily chart.
Further, currency dropped from the resistance of 38.2% Fibonacci Retracement which is indicating that weakness may continue in days to come.
On the downside, if the dollar breaks 103.40 then it will confirm the next move towards 102.80-102.55.
Alternatively, on the upside immediate resistance is seen at 104.65. A break above will change the sentiment, and the dollar will expect to retest immediate resistance 105.20-106.10.
Today, as speculation arises on how the Fed will handle monetary policy and fight to rein in inflation. The focus will on the release of US CPI data. A lower than forecasted data will extend the recent fall or vice versa.
