US DOLLAR INDEX REBOUND FROM WEEKLY LOW, PRICE ACTION SETUPS FOR USD
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Author: Sir Amar – Technical Analyst

The US Dollar Index (DXY) is taking bids to update its intraday high around 104.00 as it posts the first of three daily gains during Friday’s Asian session. The dollar’s recent rise could be related to market indecision amid a weak calendar as well as cautious sentiment ahead of the Fed’s semi-annual monetary policy report and Fed Chair Jerome Powell’s speech. The dollar extended its losses on Thursday from the day before, but the pain is unlikely to last long amid volatility in the global economy.

The Federal Reserve recently hiked interest rates by 75 basis points. This was the first 75 basis point hike since 1994 and the Fed announced it while warning that more hikes were on the horizon, with another hike in July on the way that could be 50 or 75 basis points. The US dollar was well offered as the Fed has been very open about its rate hike plans. And last week, the European Central Bank was extremely dovish on the ECB’s interest rate decision, hinting at a 25-basis point move in July with a possible further hike in September.

In the short term, the big question is whether EUR/USD can justify a much larger bounce. The ECB is not sounding aggressive here and the Fed as we heard yesterday. So, with EUR/USD, the interesting element is how long this short-term rebound could take to find lower resistance for the longer-term down move. It was a chaotic morning for GBP/USD with an initial bearish move that quickly reversed and the pair is now trading at new highs and testing above the 1.2250 psychological level. This can be an attractive topic to study fades, especially for those looking to try to bottom in USD.