Dollar Index falls to three year low as fundamentals deteriorate

Slobodan Drvenica Windsor Brokers

The dollar index remains under increased pressure and trading near new three-year low after it opened with gap-lower at the start of the week.

Turbulent situation on escalation of US-China trade war was fueled by President Trump’s latest criticism of Fed Chair Powel and signals that Powel could be replaced as the central bank does not comply with Trump’s demands to further cut interest rates that would boost economic growth.

Trump’s action produced a massive reaction of the markets, as investors further lost confidence in the US economy, on concerns that potential Powell’s replacement by the President would greatly threat the central bank’s independence.

The dollar remains in a steep downtrend since early February this year, with strong acceleration lower seen in April after Trump announced its latest tariff plan.

Loss of psychological 100 level and likely monthly close below for the first time in three years, contributes to bearish technical picture on all larger timeframes, contributing to negative outlook on deteriorating fundamentals.

Break below the floor of broader range (since 2023) and loss of important Fibo support at 99.13 (61.8% of 89.50/114.72) signals bearish continuation and unmask targets at 97.70 (today’s low / March 2022 higher base) and 95.45 (Fibo 76.4% retracement).

Immediate bias to remain firmly with bears while today’s gap is unfilled, while broken supports at 99.13 and 100 reverted to solid barriers and should cap extended upticks.

Res: 98.77; 99.13; 100.00; 100.45
Sup: 97.70; 95.96; 95.45; 94.60

Interested in Dollar Index technicals? Check out the key levels

1. R3 100.39
2. R2 99.81
3. R1 99.08
PP 98.5
1. S1 97.77
2. S2 97.19
3. S3 96.46

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

BNB prolonged correction signals deeper bearish momentum

BNB (BNB), formerly known as Binance Coin, is trading below $618 on Wednesday, marking the sixth consecutive day of correction since the weekend. The bearish price action is further supported by rising short bets alongside negative funding rates in the derivatives market.