The US Dollar (USD) is facing challenges as it attempts to maintain momentum after reaching a two-week high. Despite a strong upward move, the USD has experienced a slight decline during the Asian session on Thursday, hovering around the 97.75 mark. This represents a decrease of 0.10% for the day, reflecting some market hesitation as dollar bears are cautious in their selling strategies.
One significant factor influencing the USD is the evolving expectations regarding interest rate cuts from the Federal Reserve. Having already lowered borrowing costs by 25 basis points earlier this month, markets are increasingly anticipating further cuts in October and December. While these anticipated reductions are generally negative for the dollar, Fed Chair Jerome Powell’s recent cautious comments on the pace and timing of future rate adjustments are giving the USD some reprieve. This suggests that aggressive bearish bets may be tempered slightly, helping to alleviate deeper losses for the currency.
From a technical standpoint, there’s potentially bullish sentiment reflected in the charts. The USD’s recent close above the 38.2% Fibonacci retracement level in the August-September downturn offers a glimmer of hope for the bulls. Oscillators on the daily chart are beginning to show positive signals. This technical setup supports the prospect of dip-buying, especially around the 97.50 area, followed by further support at the 97.25 level — which corresponds to the 23.6% Fibonacci retracement.
Conversely, a decisive break below 97.25 could trigger more technical selling, pushing the dollar lower and challenging significant psychological barriers such as the 97.00 mark. If the downward trend continues, the index could face substantial support near the 96.65 region, and potentially towards 96.25-96.20, marking the lowest levels since July 2022 in response to the recent rate cuts.
On the upside, USD bulls are eyeing a breakthrough past the 98.00 threshold to strengthen their position, aiming for a potential target of 98.25, coinciding with the 50% Fibonacci retracement level. Should the dollar manage to hold above the 96.40 area, it would set the stage for further bullish gains.
Overall, the USD’s performance remains tied closely to monetary policy decisions by the Federal Reserve. With the USD being the world’s dominant currency, its fluctuating values can significantly impact global trade and economic conditions. Investors and analysts will be closely monitoring upcoming data and comments from the Fed as they navigate the uncertainties of the market.
