The dollar index is consolidating in a narrow range above a seven-week low, extending the bearish bias built by last week's sharp decline. Analysts see the outlook staying tilted lower while the index holds below the psychological 100 level, with a firm break of 99.50 support opening the way toward 98.41.
The dollar index is trading in a tight band above a seven-week low. It extends a bearish bias after falling 1.5% last week, and technical signals point to further downside while the index stays under the psychological 100 mark.
Support holds near the cloud base
Near-term action has so far been contained by the daily cloud base and the 100-day moving average near the 99.50 zone, which lines up with the 50% retracement of the move from 97.44 to 101.55. Daily studies remain predominantly bearish, with strong negative momentum and multiple moving-average bear-crosses reinforcing the drift lower. The prolonged consolidation reflects uncertainty over the situation in the Middle East, where media reports point to peace talks even as traders stay cautious.
Middle East talks could tip the balance
A successful outcome to the talks would put fresh pressure on the dollar, easing inflation risk and lowering pressure on the Fed for policy tightening. But the stall of the most recent agreement between the US and Iran warns that history could repeat. The near-term outlook is expected to stay bearishly aligned while price remains below the 100 level, which has reverted to resistance and been reinforced by the broken 38.2% Fibonacci retracement of 97.44/101.55.
A break of 99.50 would expose 98.41
A firm break of the 99.50 zone, including trendline support at 99.43, would generate an initial signal of bearish continuation, alongside a reversal pattern on the formation of a double-top at 101.55/48 on the daily chart. That would expose targets at 99.00 and 98.41 in extension. Caution is warranted on any break of the 100 barrier, though a fresh positive signal would require confirmation on extension above the 55-day moving average at 101.23.
Resistance sits at 99.90, 100.00, 100.23 and 100.52. Support holds at 99.50, 99.26, 99.00 and 98.41.
Source: ActionForex
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