US Dollar: Recovery at Risk as Pivotal Week for Global FX Market Gets Underway
Despite the gradual recovery in the last three weeks, the US Dollar Index faced difficulty breaking the resistance level around 103.4. The current outlook suggests that this resistance remains a focal point.
The rise in 10-year bond yields from 3.8% to 4.18% since the beginning of the year contributes to the dollar's strength, although a weaker course is anticipated for the DXY this week. Major currencies, and also gold, continue to experience pressure.
The dollar's recovery momentum this month has been largely supported by data indicating the sustained strength of the US economy. The cautious stance of Fed members regarding an early interest rate cut can be considered another factor bolstering the dollar.
However, the Fed's indication of three interest rate cuts this year has led to increased speculation that the dollar's strengthening will be limited in the medium term. Nevertheless, the dollar maintains its recovery momentum amid the current uncertain environment.
All eyes are on the European Central Bank's (ECB) policy meeting this week, with market participants aiming to anticipate the timing of potential rate cuts by the Fed. The market expectation suggests the ECB might implement five rate cuts this year, outpacing the Fed.
However, the ECB has indicated a slower and less aggressive approach to reducing borrowing costs compared to market expectations.
EUR/USD The euro's weakening trend against the dollar this month has signaled a potential trend reversal. The upward movement observed since October faced resistance at 1.106 (Fib 0.786) by the end of the year.
The pair, now returning to the upper band of the ascending channel, has broken below the 1.09 support level, indicating a downward shift in the ascending
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