The U.S. dollar jumped to a six-week high last week. Greenback sparked towards 104.67, highest level since 4 Jan 2023, after strong U.S. economic data and hawkish comments from Fed policymakers pointed to more interest rate hikes.
The strong United States Nonfarm Payrolls data succeeded by the hot Consumer Price Index (CPI). Further, the United States Consumer Spending, as represented by Retail Sales, rebounded while the Core Retail Sales also jumped. The Producer Price Index (PPI) for final demand declined less than expected to 6% on a yearly basis in January from 6.5% in December. All above the data indicating that US fundamentals have sparking expectations of more rate increases from the Federal Reserve.
Dollar Index, which tracks the greenback against a basket of six other currencies, settled by 0.29% higher at 103.884, on track for a third consecutive week of gains. This hawkish stance has pushed benchmark 10-Year Treasury yields to their highest levels since late December.
Dollar made a high of 104.667, a highest level since 4 January 2023. However, it retreated towards 103.8440 before closing at 103.881.
Technical –
Weekly price action resulted in formation of high wave candlestick which is indicating indecisiveness in near future. However, the dollar is still trading above 23.6% Fibonacci retracement of its previous swing, which is yet creating a probability for bounce back from every dip in the near future.
Hence, it could expect that any dip towards 102.80-102.60 could attract near term buying activities. Dollar may test 103.85-104.55 very soon.
Alternatively, on the downside crucial support will at 101.55. A break below only will result in correction. And the dollar index could retreat towards next support 100.80-100.20.
Overall sentiment will depend on Federal meeting minutes next week. A hawkish comment on Fed rate hike may spark dollar against its major counterpart.
