The dollar index remains at the back foot after a continuous five-day fall, but the range narrows on Wednesday, as traders await release the minutes of FOMC last policy meeting to get more clues on the central bank’s rate outlook for coming months.
Pullback from 107.03 (2023 high) also faces headwinds from important Fibo support at 105.43 (38.2% retracement of 102.84/107.03 upleg) which keeps the downside limited for the second straight day.
Oversold conditions on daily chart contribute to likely scenario of consolidation preceding fresh push lower, as the dollar’s sentiment was soured by the recent dovish shift in Fed policymakers’ comments, which suggest that the Fed may not need to tighten monetary policy much further than initially estimated.
Markets will focus on FOMC stance and US September inflation (due on Thursday) to get more information whether the policymakers are on track for another 25 basis points hike (November) or the central bank is done with tightening.
The dollar is likely to come under further pressure if Fed keeps dovish narrative, with sustained break of 105.43 pivot to spark fresh acceleration below 105.00 handle (near 50% retracement of 102.84/107.03) and unmask targets at 104.44/17 (Fibo 61.8% / Sep 14 trough).
Conversely, bounce above 106.00 barrier to strengthen near-term structure, however, return and close above broken trendline support (106.23) needed to confirm an end of corrective phase and bring larger bulls back to play.
Res: 105.65; 106.04; 106.23; 106.69.
Sup: 105.34; 104.94; 104.44; 104.17.
