Home Economy Dollar stays tight, building up strength for breakout

Dollar stays tight, building up strength for breakout

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Moderately positive stock market dynamics yesterday was combined with a slight 0.1% increase in the dollar index to 92.2 after two days of decline from 92.8.

The Dollar Index is now near the upper end of the converging trading range since last October. Also, a pullback is forming on the daily charts after touching the overbought area of the RSI index.

Therefore, the short-term technical picture is now on the side of the dollar bears, suggesting a further correction after last month’s rally. Also, falling long-term bond yields are playing against the dollar. In contrast to last week, this move is increasingly linked to easing inflation fears and central bank actions pushing interest rates, including 120bn monthly Fed purchases.

At the same time, it is worth separating the short-term momentum from the longer-term trend. The latter could well be on the side of the dollar as the US economy recovers more strongly, and the Fed could…

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