The US Dollar (USD) lost power throughout the American session on Monday, but it had little trouble finding demand early Tuesday. The US Dollar Index (DXY), which measures the value of the US dollar against a basket of six major currencies, remains positive above 104.00 as investors await the next catalyst during the Federal Reserve’s (Fed) blackout period.
The ISM monthly data released on Monday showed that business activity in the US service sector expanded in May, albeit at a slower pace than in April. The ISM Services PMI fell to 50.3 in May, down from 51.9 in April, and fell short of the market expectation of 51.5.
US Dollar Technical Outlook
The US Dollar Index (DXY) is trading above 104.00, which corresponds to the Fibonacci 23.6% retracement of the November-February downtrend.
In the meantime, the Relative Strength Index (RSI) indicator on the daily chart stays comfortably above 50, suggesting that buyers look to remain in the driver’s seat.
104.50 (static level) aligns as initial barrier for DXY ahead of 105.00 (psychological level). A daily close above the latter may attract more buyers and pave the way for a longer-term rebound towards 105.60 (Fibonacci 38.2% retracement, 200-day Simple Moving Average (SMA)).
On the downside, bearish pressure could increase if DXY closes the day below 104.00. In that case, 103.50 (static level) could be considered initial support prior to 103.00 (100-day SMA).
