Dollar edges back towards one-month low

Dollar Index

Dollar Index is trading down 0.22% at 101.75

The U.S. dollar edged back towards a one-month low on Thursday, as minutes from the Federal Reserve’s May meeting contained few surprises, with most participants favouring additional 50 basis point rate hikes at the June and July meetings.

The dollar index, which measures the currency against six major peers, was down 0.2% at 101.83 as the minutes showed the Fed is likely to stay the course for now, but keep its options open for a range of policy choices after July.

The index has mostly been consolidating around 102 after a short-lived bounce immediately following Wednesday’s release of the minutes.

Analysts noted that expedited tightening would allow some wiggle room if the Fed wanted to slow the tightening cycle in the second half of the year.

The dollar index reached a nearly two-decade peak above 105 mid-months, but signs that aggressive Fed action may already be slowing economic growth have prompted traders to scale back tightening bets, with Treasury yields also dropping from multi-year highs.

The implied yield on the Eurodollar futures June 2023 contract — essentially where markets see interest rates to be at that point — is down some 80 basis points this month.

ING believes there is room for this to reverse, with the Fed believing the economy is strong enough to withstand rapid tightening.

On technical fronts Dollar Index RSI stood at 27.03 and currently it is trading below all MA. So, SELL position can be taken with following target and stoploss:

TRADE SIGNAL – : Dollar Index – SELL: 101.85, TARGET: 101.69, STOP LOSS : 102.18

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