Dollar Index outlook: Limited correction of post-Fed rally likely to precede fresh push higher
|US Dollar Index
The dollar rose across the board on Thursday, following widely expected Fed’s decision to cut rates by 25 basis points and signal a slower pace of rate cuts in 2025.
The US policymakers are fully aware of the new reality, in which inflation remains elevated above desired levels and may rise further on expectations that new policies of Trump’s administration will boost economic growth and subsequently fuel inflation.
The dollar index gained around 1.3% in immediate reaction to Fed’s comments and neared key barrier at 108.04 (two-year high / 2024 peak).
The price eased in early Thursday’s trading on partial profit-taking from strong post-Fed rally, as traders also reacted on overbought conditions on daily chart.
Correction is likely to be limited in increasingly dollar-supportive fundamentals which complement bullish technical studies and shape positive near-term outlook.
Dips should be ideally contained above 107.00 zone (Fibo 38.2% of 105.37/107.97 upleg) to keep bulls intact for renewed attack at 108.04 trigger, break of which to open way for test of 108.79 target (Fibo 61.8% retracement of larger 114.72/99.20 downtrend and possibly unmask psychological 110 barrier.
Alternative scenario sees possibility of deeper correction on loss of 107.00 handle, though overall bullish bias should stay unharmed while the price stays above 106.70 (daily Kijun-sen).
Res: 107.97; 108.04; 108.79; 109.06.
Sup: 107.36; 107.00; 107.86; 107.60.
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