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The dollar index, which slipped about 0.6% in the European trading session, has been pressured by the prospects of a potential slowdown of the pace of the interest rate hike’s path.

A lower-than-expected ISM manufacturing data combined with the payrolls seemingly raised the risk of a recession which may open the path for the Federal Reserve for a dovish tone in their current monetary policy stance of tightening which pressures the equity sector and boost the dollar for several months.

Traders await the CPI data due on Thursdays for further clues about the price development in the US to conclude the central bank’s potential operations. A lower CPI might show that the efforts to fight inflation kick in which could pressure the dollar index in a bearish sense.

Looking at the daily interval, we can identify an outside bar close on Friday which might indicate a change in the market structure of a current balanced price range as traders may lean on the extremes of the rotational price range while a possible dip below the lows of the bracket could initiate absorption with short covering for rotational scenarios back to highs as the currently calculated bias for the session pointing to the upside. The mixed signs with the more likely bullish median-term perspective might strengthen the scenarios of balanced market behavior.

Median- to long-term forecasts pointing to the upside towards $110, according to algorithm calculations while the market found some seeming core selling around the prior Year’s VWAP close level and may target the lower extreme of the value close area, depending on the mentioned potential absorption auction around the lows.

Looking at the recent COT data for the U.S dollar index, we can observe long liquidations and new short openings in the institutional sector while the funds were more likely to cover short with new long positions, giving the total context a mixed view as of the data from December 27 to January 3.  

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