Português
Español
Français
русский
The US dollar index is starting to show signs of forming a major market bottom, despite the fundamentals showing diverging as the Fed are highly likely not to hike rates on June 14th.
The Federal Reserve officials do appear on track to stop their run of interest-rate hikes when they meet, plus the Fed Rate Watch Tool also shows a small 25 percent chance of a rate hike.
Credit Suisse are also noting that there are signs that the US dollar index is bottoming out and we could be about to see some strength ahead against other currencies in the near term.
The bank notes that “We are now also seeing a range of breaks of major levels across a range of USD crosses and with daily and weekly momentum positive we maintain our view the potential for a broad and large ‘double bottom’ continues to increase markedly.”
They add that “We continue to look for strength back to the March highs, 200-DMA and 38.2% retracement of the 2022/2023 fall at 105.63/106.13. Above here though stays seen needed to see a ‘double bottom’ reversal confirmed to open the door to a more sustained and material phase of USD strength with next resistance seen at 107.78/99.”
Sentiment analysis is also a worry for bulls as it shows a small majority of traders are long the US dollar index, which likely means the need to be cautious right now. This could spell more gains for the buck.
According to the ActivTrader Market Sentiment tool some 24% of traders are bullish towards the US dollar index, which doesn’t provide a hint that bears could be in for some pain this week.
Overall, with retail traders remaining very confidence we are probably going to see the US dollar index heading lower. Also, the technicals are starting to agree with the sentiment dynamic.
US dollar index Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the US dollar index is issuing a buy signal after bouncing strong from the bottom of the Ichimoku Cloud and is breaking resistance.
I would be inclined to look for a short-term move towards the 105.00 area and complete rewinding of the early month losses in the Index. Watch out for a break above 104.50 confirm the breakout.
US dollar index Medium-Term Technical Analysis
The daily time frame is showing that a major buy signal has just been issued, with the Lagging Line moving above the Ichimoku Cloud for the first time this year.
Therefore the US dollar looks primed for a major rally in the medium-term. Watch out for a coming test of the US dollar index’s 200-day moving average, around the 105.50 level.
