Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

A Deeper Correction For The Dollar In The Offing

By FxPro Financial Services Ltd (Alexander Kuptsikevich)ForexJan 13, 2022 04:41AM ET
www.investing.com/analysis/a-deeper-correction-for-the-dollar-in-the-offing-200614609
A Deeper Correction For The Dollar In The Offing
By FxPro Financial Services Ltd (Alexander Kuptsikevich)   |  Jan 13, 2022 04:41AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Fundamental and technical factors on the dollar locally give opposite signals. However, after a long period of strengthening the American currency, a corrective DXY pullback looks like a logical short-term prospect.

DXY index, daily chart.
DXY index, daily chart.

On Wednesday, the US dollar came under pressure, the sharpest loss since last May and coming out of a prolonged consolidation. The dollar index retreated below 95 for the first time in two months.

Technical Outlook

EUR/USD surpassed 1.1400, trading at 1.1440 at the time of writing, having consolidated beyond the narrow range where the pair had spent the previous almost two months. Often such a decisive move out of the range is followed by a further breakout move, which we may well see in the coming days.

The dollar index closed below the 50-day moving average on Tuesday and made a further move lower on Wednesday. The fall out of the range gave an informal start to the correction after the rally from May through most of November and the sideways movement in December.

A potential target for such a pullback is seen in the 93.50-94.00 area. Near 94 is the 61.8% Fibonacci retracement of the dollar's move amplitude in 2021 and the starting point of the last rally in November. Near 93.50, the peak area of the index last year could be equally strong support.

It hardly makes sense to say now that we are seeing the start of a big wave of dollar decline, as solid fundamentals support its growth. It looks like Fed members started a competition on whose expectations and comments are the most hawkish, and consumer inflation has given little reason to change the rhetoric.

Among the latest comments is Powell's reassurance that the economy can cope with rate hikes. Fighting inflation is a top priority for the US central bank. Mary Daly, president of the Federal Reserve Bank of San Francisco, predicts a first rate hike as early as March. This practically rules out a pause between the end of balance buying and the first policy tightening.

Furthermore, there are increasing signs that rate increases can continue to occur more frequently than once a quarter, as was the case in the previous tightening cycle. Many other central banks in developed countries are not yet prepared to tighten their policies vigorously, which generally creates a sustained pull towards the USD on the interest rate differential in its favor.

A Deeper Correction For The Dollar In The Offing
 

Related Articles

Kenny Fisher
Australian Dollar Dips After WPI By Kenny Fisher - May 19, 2022

After three successive winning sessions, the Australian dollar reversed directions on Wednesday. In the European session, AUD/USD was trading slightly above the symbolic 70...

Craig Erlam
GBP/USD: Can It Break Major Support? By Craig Erlam - May 19, 2022

Possible divergences appearingThe pound has come under heavy pressure recently, particularly against the dollar which has been performing well against the broader market. While the...

A Deeper Correction For The Dollar In The Offing

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Muhammad AFZAL
Muhammad AFZAL Jan 13, 2022 5:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good artical
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email