The dollar index dropped to its lowest level in two months on Monday, breaking through the 99.50 support zone that had turned back several earlier attacks. The slide reflects growing bets that the Federal Reserve will hold interest rates steady in September, and technical signals now point toward further declines with 99.00 as the next target.
The dollar index fell to its lowest level in two months on Monday. It did so after breaking through the 99.50 support zone — the daily Ichimoku cloud base and trendline support that had turned back several earlier attacks. The greenback is now down for a second straight session.
Growing bets that the Federal Reserve will hold interest rates steady in September are driving the move. Traders built those bets after data showed the labor sector weakening further. The same data also showed inflation easing in July.
The drop also pushed the dollar index through the floor of its 99.25/99.95 range, a band that extends into its third week. A sustained break here confirms the bearish signal and extends the fall from 101.48 already underway.
Daily technical studies are now largely in a bearish setup, which supports near-term acceleration toward 99.00 — the 200-day moving average and the 61.8% Fibonacci retracement of the 97.44/101.55 range, guarding 98.67 (the May 29 trough) and 98.41 (the 76.4% retracement) below it. The broken cloud base now reverts to resistance and should cap any near-term bounce.
Resistance sits at 99.50, 100.00, 100.16 and 100.31. Support sits at 99.16, 99.00, 98.67 and 98.41.
Source: ActionForex
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