The U.S. dollar lost momentum, with the Dollar Index falling more than 0.3% yesterday. The dovish tone was reinforced by the Richmond Fed President, in contrast to his colleague’s stance a few days earlier. In addition, the lackluster U.S. long-term Treasury yields, which are trading below 4%, put pressure on the dollar’s strength. The euro, on the other hand, faced challenges as yesterday’s Consumer Price Index (CPI) came in below expectations. This suggests that the risk of inflation in the euro-zone is diminishing, which may temper the euro’s strength. In addition, the Japanese Yen weakened significantly yesterday as the Bank of Japan (BoJ) Governor struck a dovish tone in his statement following the announcement of the interest rate decision.
Dollar Index, H4
The U.S. Dollar saw a modest recovery against the Yen. However, analysts are warning of a bearish long-term outlook for the dollar. Market participants are expecting the Federal Reserve to begin cutting interest rates next year, which could undermine the greenback’s appeal. For more clarity on the dollar’s trajectory, investors are eagerly awaiting this week’s release of the core Personal Consumption Expenditures (PCE) price index. At the same time, insights from the U.S. GDP data will be crucial for clues on whether inflation has stabilized enough for the Fed to potentially adjust policy.
The Dollar Index is trading lower following the previous retracement from resistance. The MACD is showing increasing bearish momentum, while the RSI is at 37, indicating that the index may extend its losses towards the support level, as the RSI remains below its mid-line.
Resistance level: 102.60, 103.50.
Support: 101.80, 101.30.
GBP/USD, H4
The GBP/USD pair rebounded yesterday, driven by a weakening dollar. The dollar lost steam as the dovish stance of the Federal Reserve was reinforced, especially when the Richmond Fed President made a dovish statement yesterday. Market participants are now focusing on the UK’s Consumer Price Index (CPI) data, which is due later today, to assess its potential impact on the Cable’s price movement.
The GBP/USD rebounded yesterday, but has yet to reach its recent high, as it lacks bullish momentum. The RSI is floating near the overbought territory while the MACD is falling, indicating that the bullish momentum has faded.
Resistance level: 1.2729, 1.2815.
Support: 1.2630, 1.2528.
EUR/USD, H4
The euro rebounded as the U.S. dollar fell yesterday. The Federal Reserve’s dovish stance prevented the dollar from making a significant recovery. Despite the fact that the Euro’s Consumer Price Index (CPI) came in below expectations, indicating that inflationary pressures in the Eurozone have eased, the Euro was able to gain strength on the back of the weakened dollar.
The EUR/USD rebounded yesterday, indicating that the pair is still trading in bullish momentum. The RSI is floating close to the overbought territory, while the MACD is floating above the zero line, indicating that the bullish momentum is still intact.
