Is the US Dollar Finally Losing Momentum?

investing.com:

The US dollar index, after reaching a peak of 106.84 during its 11-week bullish streak, now faces the risk of ending this streak by potentially falling as low as 105.5.

Several factors have contributed to the US dollar's strength on a global scale, including a hawkish view of the US dollar supported by robust economic data from the Federal Reserve. Meanwhile, recession concerns in the Eurozone and weak data from Asia have added to the dollar's rise.

This continuous increase in the dollar index, the longest in the last nine years, is largely underpinned by the expectation that the Federal Reserve will maintain high interest rates through 2024. Additionally, the US economy exhibits more resilience compared to other economies, benefiting from positive trends in employment, inflation, and energy prices.

Recently, there has been a rapid pullback of up to 1% from the dollar's peak, providing some relief to other major currencies.

This correction appears to be linked to concerns about a potential partial shutdown of the US government starting on October 1, as the Senate has yet to reach a budget agreement. Consequently, US 2-year and 10-year bond yields have also eased.

While the US dollar index may have paused in the 106 region, it still maintains an upward trend. A weekly close above an average of 105.25 suggests a high likelihood of the dollar resuming its upward trajectory.

Furthermore, if the recent retreat of the dollar is indeed driven by concerns about a government shutdown and this risk is mitigated through an agreement, it may increase demand for the dollar again.

In such a scenario, the DXY could potentially target the critical resistance level of 108, surpassing its previous peak in the 106 region. Conversely, daily