US DOLLAR FORECAST

• The U.S. greenback, as measured by the DXY index, sinks to its lowest stage in 5 months, with skinny liquidity situations doubtless amplifying the selloff
• Rising expectations that the Fed will considerably ease its stance in 2024 have been the principle driver of the dollar’s retreat in latest weeks
• This text affords an evaluation of the U.S. greenback’s technical and basic outlook, analyzing important value thresholds that would act as assist or resistance within the coming buying and selling classes

Most Learn: US Greenback in Dangerous Waters, Technical Setups on EUR/USD, GBP/USD, Gold

The U.S. greenback, as measured by the DXY index, plunged to its weakest level in 5 months on Wednesday (DXY: -0.55% to 100.98), pressured by a considerable drop in Treasury charges, with the 2-year yield sinking beneath 4.26%, its lowest stage since late Could.

Whereas market strikes had been doubtless amplified by skinny liquidity situations, attribute of this time of yr, wagers that the Federal Reserve will reduce charges materially in 2024 have been the first bearish driver for the dollar in latest weeks.

The Fed’s pivot at its December FOMC assembly has bolstered ongoing market traits. For context, the central financial institution embraced a dovish stance at its final gathering, indicating that talks about decreasing borrowing prices have begun, probably as a part of a technique to prioritize progress over inflation.

The chart beneath exhibits how the DXY index has been falling for some time, simply as easing expectations for the upcoming yr have trended increased in a significant method.

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Supply: TradingView

From a technical standpoint, the U.S. greenback broke beneath 101.50 and sank towards assist at 100.75 on Wednesday. Bulls should defend this space in any respect prices to curb downward stress; failure to take action may lead to a pullback towards the 2023 lows close to 99.60. On additional weak point, the main target shifts to 94.75.

Conversely, if consumers return in power and spark a bullish bounce off present ranges, overhead resistance looms at 101.50, adopted by 102.00. Contemplating the prevailing sentiment, breaching this hurdle might be a formidable activity for the bulls. Nevertheless, if surpassed, consideration will flip to 102.60 and 103.30 thereafter.

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US DOLLAR INDEX (DXY) CHART

US Greenback Index (DXY) Chart Ready Utilizing TradingView