Currencies 2 MIN READ

Dollar backs away from post-data brink but remains at risk

August 11, 2022By Reuters

The dollar index weakened on Thursday after PPI and jobless claims data and remained at risk of further losses even though it survived a test of its post-CPI low at 104.63 by the 23.6% Fibo of the 2021-22 uptrend at 104.55.

Rebounding Treasury yields trimmed the dollar’s losses, but it remained below this year’s uptrend line and pivotal 50-day moving average.

Though longer-term Treasury yields have rebounded amid unwinding of previous curve flattening and inversion flows, perhaps skewed by today’s 30-year Treasury auction, the July CPI and PPI reports lend support to the view U.S. inflation may be peaking, which may diminish expectations for dollar-supportive Fed rate hikes.

The dollar’s enormous 22.5% rally off the pandemic lows to its highest in 20-years left it extremely overbought and it hit a thicket of long-term technical resistance before Wednesday’s first close below this year’s uptrend line and 50-day moving average, last at 105.59, and at risk of a broader retracement.

A close below 104.55, the 23.6% Fibo of 2021-22’s advance, would target supports by the 100-DMA that’s rising toward the 38.2% Fibo of this year’s rise at 103.69, close to the post-June Fed hike lows.

(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

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