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Dollar index regains traction after softer June inflation cools rate bets
The index pulled back after a break of the 100.40 trendline earlier, but it remains above the 100 support level tied to a 38.2% Fibonacci reading of 97.44 to 101.55.
The dollar index rebounded after a two day slide, with Action Forex pointing to softer than expected US inflation data for June, including CPI and PPI, that cooled expectations for additional Fed rate hikes.
The move comes after Wednesday’s break of trendline support at 100.40, which pushed the index to a one month low and triggered a bearish signal, though the index has held above the pivotal 100 psychological level and a 38.2% Fibonacci level derived from 97.44 to 101.55.
Action Forex said fundamentals remain supportive for the greenback, noting the US economy’s relative strength versus other Western economies and its lesser exposure to energy shocks, which tends to keep the dollar positioned as a safe haven.
The outlet also cited potential inflation pressure tied to renewed geopolitical risk, saying upbeat June inflation figures may have been temporary as tensions escalated and a closure of the Strait of Hormuz could again fuel inflation expectations.
It added that to confirm a constructive reversal, the index would likely need to regain the broken trendline and extend above the 20 day moving average near 100.82.
Latest closeDollar index 100.50 ▼0.4%