The Greenback, when tracked by the US Dollar Index (DXY), abandons the area of monthly peaks and recedes toward the 101.30 zone on turnaround Tuesday.
A test of YTD peak remains in place
The US Dollar’s correction comes after three consecutive daily advances and seems to have met a tough nut to crack in the 101.60-101.70 band, a region close to its yearly highs around 101.80 recorded in late June. Despite the daily pullback, the index continues to trade well above its key 200-day SMA, keeping the short-term constructive outlook in place and allowing for extra advances down the road.
Oil, yields and inflation
Cooling tensions in the Middle East have been collaborating with the severe pullback in crude oil prices. That said, prices for a barrel of the American benchmark for sweet light Crude Oil (WTI) have retreated for the third consecutive day, breaching the key $80.00 mark and hitting new two-week troughs.
By the same token, inflation fears seem to have shrunk a tad, motivating US Treasury yields to extend their corrective move across the spectrum, all at the time when market participants continue to assess the potential Fed rate path prior to the FOMC event on Wednesday.
On the latter, the central bank is widely anticipated to keep its hand steady once again, leaving its Fed Funds Target Range (FFTR) intact at 3.25%-3.75%. Meanwhile, US inflation is expected to gather all the attention of the media questions, particularly in light of the softer-than-expected CPI data in June and the current cooling of geopolitical effervescence and its impact on consumer prices going forward.
Back in the US, disappointing data from the Conference Board’s Consumer Confidence gauge accompany the move lower in the buck. Next on tap is the API’s weekly release of US crude oil inventories ahead of Wednesday’s official data by the EIA.
Technical view
In the daily chart, the US Dollar Index trades at 101.29. The near-term bias is bullish, with price holding above the 55-day, 100-day and 200-day simple moving averages (SMAs), which cluster between roughly 99.1 and 100.3 and reinforce an underlying uptrend. Momentum remains constructive, as the 14-period Relative Strength Index at 57 stays comfortably above the midline, while the Average Directional Index around 26 suggests a modest but still active trend rather than an exhausted move.
On the topside, initial resistance is outlined by the recent horizontal cap at 101.98, where a daily close higher would open the way for further gains. On the downside, immediate support is seen at 100.64 and then 100.39, with a deeper pullback eyeing the 99.50 area ahead of the 55-day SMA near 100.30 and the 100-day SMA around 99.72; a break below these moving averages would expose the more distant structural floors at 97.62 and the mid-95.00s.
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