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Author: Mr. Amar – Technical Analyst

      Global market sentiment was a mixed bag this past week. Surprisingly, despite a more aggressive Federal Reserve, sentiment improved. Chairman Jerome Powell opened the door for a 50-basis point hike at meetings if needed. Worries about a recession in 2023 have also been downplayed. The US dollar was mixed, outperforming the euro. and the pound sterling. Sentiment-linked Australian and New Zealand dollars outperformed. Risks of economic events return in the week ahead as the US agenda is busy. Tier one event risks from this part of the world include the Fed’s preferred measure of inflation and nonfarm payrolls, which opens the door for a more aggressive central bank.

Over the past few days, US Dollar Index (DXY) volatility has moderated with the price attempting to consolidate around the 99.00 area. Despite the recent congestion, the 12-month trend remains bullish as reflected on the reflecting the daily chart below, where the index is sequentially making higher highs and higher lows while edging up on a flawless rising trend line that extends from the May 2021 lows. Rumors of regime change in Russia coupled with indecisiveness over Kyiv-Moscow peace talks weighed on market sentiment recently.

While the medium-term technical signals are positive for the US Dollar, it is necessary to focus on a smaller time frame for clues as to direction and market direction in the near term. For this, the four-hour candlestick chart may be more useful. If we zoom in on this timescale, we can see at first glance what appears to be a double bottom development, a bullish pattern resembling the letter W. As of Friday, the double bottom appears to be nearing completion, but the price should move a little higher. To confirm this chart formation, we need to see a decisive push above the 99.30 to 99.45 resistance. If we see a sustained break of this high, DXY could be on track to reach the 101.00 level, a measured target obtained by projecting the pattern’s height from the breakout point.