Dollar Index Nears Key Support $100.5: Will Fed’s Dovish Tone Spark a Bullish Reversal?

Market Overview

Last week’s key event was Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, where he made it clear that “The time has come for policy to adjust. The direction of travel is clear.” His comments suggest that the Federal Reserve is gearing up to ease monetary policy, possibly as soon as the next meeting.

This dovish tone impacted the U.S. Dollar Index (DXY), currently around 100.70. The U.S. 10-Year Bond Yield also held near 3.795%, reflecting the market’s anticipation of lower future rates.

Over in Europe, the German Ifo Business Climate index slipped slightly to 86.6, putting pressure on the EUR/USD pair, trading around 1.0800. The strong dollar, bolstered by the Fed’s stance, continues to limit gains in the euro.

Events Ahead

As we look ahead, Fed Chair Powell’s recent comments will remain in focus, especially with further speeches by FOMC members this week.

In the U.S., Durable Goods Orders are forecasted to rise by 4.0%, which could strengthen the dollar even more.

Traders should keep a close watch on how these events unfold, as they will likely impact both the dollar and U.S. bond yields.

US Dollar Index (DXY)

The Dollar Index (DXY) is currently trading at $100.703, up slightly by 0.02%. On the 4-hour chart, the index has found immediate support around the $100.538 pivot point.

The recent formation of a Doji candle, following a bearish streak, suggests that sellers may be losing momentum. Additionally, the appearance of what resembles a Tweezer’s Bottom pattern indicates that buyers could start to take control, potentially leading to a bullish correction.

Immediate resistance is at $100.945, with further levels at $101.179 and $101.619. The 50-day EMA is at $101.358, providing another layer of resistance.

Conclusion: The Dollar Index shows a bullish outlook above $100.538. A break below this level could trigger a sharp sell-off.

US 10-year Bond Yields

EUR/USD Technical Forecast

The EUR/USD pair is currently trading at $1.11842, down 0.04% on the day. On the 4-hour chart, the pair faces significant resistance at the $1.12024 pivot point.

This level has proven to be a tough barrier for the euro, and the currency pair is showing signs of a bearish correction.

The EUR/USD is likely to retrace to the 23.6% Fibonacci level at $1.11795. If it breaks below this support, the next key level to watch is the 38.2% Fibonacci retracement at $1.11656, which could provide additional support. The 50-day EMA at $1.11264 offers further downside protection.

Conclusion: The outlook remains bearish below $1.12024. A break above this level could shift the momentum back to the upside.