The dollar index continues to trend higher and hit two-week high on Wednesday, benefiting from the hawkish outlook from the Fed, as the central bank will deliver its monetary policy decision later today.
The central bank is not expected to make any changes to the policy, with high interest rates to be kept for extended period and further contribute to positive environment for the greenback.
Recent solid economic data from the US signal that the economy is resilient and can stand higher borrowing cost for some time, while inflation remains sticky and likely to produce increased headwinds to the pace of expected rate cuts this year, which will boost positive outlook for the dollar from the fundamental side.
Technical picture on daily chart is also improving, as the recovery leg from 102.26 (Mar 13 low) extends into the fifth straight day and generated bullish signal from Tuesday’s close above the top of thickening daily Ichimoku cloud.
Today’s fresh extension higher broke above 200DMA (103.47) and 50% retracement of 104.85/102.26 (103.55) with sustained break above these levels to further strengthen near-term structure and open way for probes above next pivotal barrier at 103.86 (Fibo 61.8%).
However, caution is still required as 14-d momentum stays in the negative territory and stochastic is overbought, but near-term bulls are expected to hold grip while the price stays above daily cloud top/200DMA.
Res: 103.86; 104.25; 104.85; 105.47.
Sup: 103.47; 103.38; 103.25; 102.96.
