US Dollar Eases for Now but Key Support Test Still Likely: Pairs, Levels to Trade
The US dollar retreated for a second day in early European trade as risk appetite improved further. But it remained to be seen whether the weakness will last, given the ongoing bullish trend amid strong data and a hawkish Fed.
Following Tuesday’s hotter-than-expected CPI data, the focus will turn to more data as we approach the latter half of the week, with retail sales, jobless claims and consumer sentiment among the data highlights in the next couple of days.
If this week's upcoming data, especially retail sales, continue to showcase economic resilience in the US, it is likely to bolster the US dollar further.
Apart from profit-taking after solid post-CPI gains, one other factor that helped to weigh on the dollar over the past day and a half has been the improvement in risk appetite insofar as the global equity market is concerned.
This morning saw Germany’s DAX index hit a fresh record high, despite cautious comments from ECB President Christine Lagarde, and mixed earnings.
Sentiment improved after US tech megacaps rebounded on Wednesday, following the CPI-related sell-off the day before. The speedy improvement in sentiment helped to lift some of the risk-sensitive commodity dollars against the greenback.
The EUR/USD recovered a tad after Lagarde said rising wages are increasingly becoming a pivotal consideration for policymakers as they evaluate the timing for initiating interest rate reductions.
Weak data in the UK kept the dollar’s losses in check, however.
Ahead of the above-mentioned data releases, the dollar index has now reached the top of a key support area between 104.26 to 104.60.
The upper end of this range was resistance from last week, while the lower end converges with the high from December.
The DXY
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