Mid-Week Forecast - dollar stays firm despite risk-on sentiment

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Mid-Week Forecast – dollar stays firm despite risk-on sentiment

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The dollar index edged higher on Tuesday and remains steady to push for a significant recovery ahead of job data on Wednesday and Friday. Aussie growth slower but beat estimates. Meanwhile, oil traders will weigh in on the OPEC+ decision today. What are the major risk drivers traders should watch out for?

A mixed sentiment on Wednesday dominates the market just about an hour after the London session opened. The dollar looks ready to resume Tuesday’s recovery after faltering below 92.5 – its lowest level in over three weeks. The dollar was expected to regain ground last week after Fed Chair Powell admitted that tapering will happen this year despite the market’s concerns that the central bank might extend the timeline till next year as a result of the delta variant spread. However, he handed the currency a big blow with dovish comments on the interest rate and employment. The dollar which started retreating days before the event plummeted further below 92.5. However, it seems all that is over. The dollar bulls will try to push again as uncertainty regarding the size of the stimulus cut is yet unknown until the next FOMC announcement.

Dollar staging recovery despite risk-on

As the chart above shows, the dollar index (DXY) had a sharp rebound off the 92.47-92.5 support zone on Tuesday. A higher bullish correction up to 93-93.18 resistance zone should follow if the price breaks above the red falling trendline and the neckline of an inverted head and shoulder pattern. The last week’s supposed bullish reaction to tapering might then start to surface. Later today, the ADP unemployment change and ISM manufacturing data will be watched closely. Disappointing data will set the recovery back. However, if the market beat the estimate by a good margin, we should see the expected bullish breakout. Meanwhile, Friday will host the bigger events – US Non-Farm Payroll and Unemployment rate data release.

Is the S&P 500 close to another top?

As the chart above shows, the S&P 500 seems to be close to a terminus point for the current upsurge. While the price might hit 4557 (61.8% Fibonacci retracement level), the market seems overbought and another di is quite close.

USDCHF 0.91-0.92 range continues

In the last two weeks, USDCHF has stayed in a 100 Pips range between 0.92 and 0.91. The price is close to the top of the range around 0.92. Will there be another rejection or the price will break out this time? This is one to watch closely.

EURUSD – bearish reversal coming?

EURUSD seems to have completed a corrective structure just below 1.185. If the dollar moves as expected, this currency pair should plunge. Also technically, a head and shoulder pattern is emerging with the neckline just 7 pips below the  1.18 psychological level. A break below the neckline should force the pair toward 1.17.

Other instruments and currency pairs are discussed in today’s video analysis below.

Disclaimer: This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This communication has been prepared based upon information, including market prices, data, and other information, believed to be reliable; however, TigerWit does not warrant its completeness or accuracy. Trading CFDs involve risk and can result in loss of capital.

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