US Dollar recovers from its earlier deep red losses.
The US Dollar Index falls significantly below 104.00, with bears attempting to breach the heavyweight 200-day SMA.
The US Dollar (USD) is returning to flat after a knockdown on Thursday. As a series of factors exacerbated a downward move in the US Dollar Index (DXY) overnight.
Market mood increases following Nvidia’s earnings beat and a new all-time high for the Japanese Nikkei.
The first dip occurred after the US Federal Reserve released the minutes of its January meeting. Despite the fact that certain Federal Open Market Committee (FOMC) members voiced. They are concerned about decreasing interest rates too rapidly, having learnt from Fed Chairman Paul Volcker’s previous policy error in the 1980s. With the DXY crushed, the Greenback experienced a second selling wave after Nvidia reported stunning profits. Spreading the positive market mood to Asia. Where the Japanese Nikkei touched all-time highs.
On the economic data front, Thursday’s docket is packed with leading indicators. Aside from the normal market moving first jobless claims, the February Purchasing Managers Index (PMI) statistics are also coming. With no less than four Fed speakers, volatility appears to be certain.
US Dollar Index Technical Analysis:
Risk On and Dollar Flat
The US Dollar Index (DXY) declined below 104.00. overnight. Although the Fed Minutes’ main lesson is that Fed members are concerned about premature interest-rate decreases. Markets believe the Fed is on track for a rate cut in June. Meanwhile, Nvidia earnings have created a surge of risk appetite around the world. And that mood is a second reason for the Greenback’s decline this Thursday. Later today, US PMI data could reverse some of the recent losses.
To the upside, the 100-day Simple Moving Average (SMA) near 104.98 is the first level to watch as a support that has now turned into resistance. If the US Dollar rises to 105.00 on the strength of good PMI data, 105.12 is a significant mark to watch. One step beyond The high for November 2023 is 105.88. Finally, 107.20 – the 2023 high – may reappear, but only if markets reprice the timing of another Fed rate decrease, pushing it back to the fourth quarter of 2024.
The 200-day Simple Moving Average at 103.72 has been violated, which should attract more US Dollar bears looking to trade the break for a weaker US Dollar. The 200-day SMA should not give up so easy, therefore a minor retreat back to that level might be more than welcome. It may eventually lose strength as a result of the continued selling pressure and may fall below 103.16 at the 55-day simple moving average.
