After being bruised and beaten by a dovish Federal Reserve on Wednesday evening, the Dollar used today’s trading session to nurse its wounds.
The Greenback appreciated against most G10 currencies on Thursday as Treasury yields edged higher. Buying sentiment towards the currency was slightly stimulated by the strong first-quarter U.S. GDP data that signalled a rapidly improving economy.
U.S. economic growth expanded at a 6.4% annualised rate in the first quarter of 2021 thanks to rising vaccinations, government aid, and strong consumer spending. The impressive GDP figure reconfirms that the U.S. economic recovery is gathering speed. It does not end here. The number of American’s filing new unemployment claims fell to 553,000 last week. This was the lowest level since the first wave of the pandemic a year ago and the third straight week of jobless claims below 600,000. Although the Federal Reserve remains ruled by monetary doves, the question is for how long? As economic data continues to improve, the labour force moves in the right direction and inflation accelerates, hawks may reawaken from slumber.
Back to the technicals…
The Dollar Index (DXY) has found minor support around the 90.50 level. Although this could offer bulls a chance to strike back, prices are still trading below the 100-day Simple Moving Average while the MACD remains below 0. If bulls are unable to exploit this opportunity to push prices back above 91.05, this could result in a decline back towards 90.50 and 90.00.
Alternatively, a solid break above 91.05 may open the doors towards 91.31 and 91.80, respectively.
Weekly chart remains bearish
Dollar bears remain in the driving seat on the weekly timeframe. Prices are trading below the 20-week and 50-week Simple Moving Average. Sustained weakness below 91.50 may trigger a decline towards 90.00 and 89.00, respectively.
Keep a close eye on monthly candle close
April’s monthly candle could produce a bearish engulfing pattern which may signal the continuation of the current monthly downtrend. Bears need a solid monthly close below 90.50 to drive prices lower with the first level of interest at 89.17.
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