Alexander Kuptsikevich
FxPro Financial Services Limited
Current situation
The Dollar Index closed last week at 100.55, its lowest level since July 2023. It has not been consistently below this level since April 2022.
Technical analysis
Although the change of monetary regime in the US is of fundamental importance, the bulls may launch a counterattack in the short term. On a weekly basis, the Dollar's RSI has moved back into oversold territory, which was last seen 13 months ago, marking a turning point. In 2020, the entry into oversold territory did not lead to an immediate reversal, but the downside momentum was largely exhausted.
Just as importantly, this exhaustion occurred on the move towards the key 200-week moving average, the approach of which in early 2022 revived dollar buying momentum.
Fundamental analysis
From a fundamental perspective, the currency market has unnecessarily sold off the dollar. Interest rate futures are now realistically pricing in a 25-point (66%) rate cut in September, in stark contrast to the 50-point confidence in a cut recorded on 5 August.
By moving expectations towards a normal (25-point) hike, the Fed will sound more hawkish than the market has priced in, favouring a dollar rally in the coming weeks.
Forecast
The only way a potential short-term dollar bounce has a chance of becoming a rally is if there are negative shocks to financial markets. In the absence of such shocks, the dollar's recovery may stall in the 101.7-102.5 area.
Trade Responsibly. CFDs and Spread Betting are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.37% of retail investor accounts lose money when trading CFDs and Spread Betting with this provider. The Analysts' opinions are for informational purposes only and should not be considered as a recommendation or trading advice.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.1200 after upbeat US data
EUR/USD stays below 1.1200 in the American session on Monday. The data from the US showed that Durable Goods orders rose at a much stronger pace than expected in July, supporting the USD and not allowing the pair to stage a decisive rebound.
GBP/USD fluctuates near 1.3200 amid cautious market mood
GBP/USD is off multi-month highs, consolidating gains near 1.3200 on Monday. Better-than-forecast Durable Goods Orders data from the US and the cautious market stance helps the US Dollar hold its ground and limits the pair's upside.
Gold retains gains above $2,500, higher highs at sight
Gold retreats from the daily high it set above $2,520 but manages to stay afloat above $2,500 on Monday. The 10-year US yield stabilizes near 3.8% and the US Dollar benefits from the negative shift seen in risk sentiment, making it hard for XAU/USD to stretch higher.
Three fundamentals for the week: Focus on the fragility of the US economy Premium
Is the world's largest economy faltering? The first key two figures to be released this week are focused on the fragility of the economy, and the last one is on the battle the Fed is winning: inflation.
Toncoin price crashes double-digits as Telegram CEO Pavel Durov Arrested
Toncoin (TON) plunged 14% in two days, reaching a low of $5.23 on Sunday. As of Monday, it trades at around $5.73. This bearish sentiment was initiated by the arrest of Pavel Durov, CEO of Telegram, by the Fench authorities on Saturday.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.