Will the jitters of Fed pause rate hike cycle, put pressure on dollar?

Will the Jitters of FED pause rate hike cycle, put pressure on dollar?

After hitting a three-month high, the U.S. dollar retreated slightly.  The currency sparked above 104.3500 levels last week that was the highest level since 27 May 2023.

However, speculation over the Fed may pause the rate hike cycle very soon and added pressure since morning. In the meantime, traders digest last week released, Nonfarm Payrolls numbers, where the US economy created more jobs than initially estimated 187K jobs, although the jobless rate inched higher to 3.8% and wage inflation seems to have cooled somewhat during last month.

 The recent job numbers also buildup hope that Fed may pause its interest rate cycle very soon. And a rate hike in July was the last one in the current policy tightening spell.

Key events in the US this week: Factory Orders (Tuesday) – MBA Mortgage Applications, Balance of Trade, Final S&P Global Services PMI, ISM Services PMI, Fed Beige Book (Wednesday) – Initial Jobless Claims (Thursday) – Wholesale Inventories, Consumer Credit Change (Friday).

 Elsewhere, international leaders prepare to attend the G20 summit in India later this week, although the gathering will not feature Chinese President Xi Jinping.

Technical Outlook

Dollar index witnessed a meaningful recovery from the low 102.9360 and settled at 104.2630 against previous week’s close of 104.1870. Currency made a high of 104.3550, which was the highest level since 27 May 2023.

A symmetrical triangle pattern was noted on the above chart. The currency recently reached near its massive resistance 104.5525, trend line. Also, it is trading below 50 SMA. Further, recent price action resulted in formation of a doji candlestick which indicates indecisiveness in near future.

All above technical aspects indicate that the dollar index is treading at very crucial levels, a break above 104.5525 will open the door for the upside level 106.25-107.25. Else, it will correct 2%-3% again. Downside levels expect around 102.10-101.20.

Adding to this, after the recent U.S job numbers hope that Fed may pause its rate hike cycle very soon, this sentiment is likely to hold weakness in the dollar against its major counterparts.