DXY – Weakness continues despite supporting data. Short from 105.50?

Despite strong inflation data in recent weeks, the dollar still looks weak against all currencies. The current correction is probably nothing more than a rebalancing of positions, as there was a lot of accumulated short positions. Despite the Fed’s tightening, fundamentals are slowly deteriorating for the dollar as the Fed’s pivot is set to lower dollar yields, making them less attractive as a store of value. Although the pivot is not yet a fact, the leading function of the market already estimates this probability.

Technical Analysis

For now, the 65-period is providing resistance and trading may be held in the narrow 103.85 – 102.70 range for a few more sessions. Since the price is in the middle of nowhere, there may be an attempt to reach the 105 – 105.80 resistance zone, where I expect a reversal and continuation of the downtrend.

The DeMarker Oscillator is just below the Overbought territory and there may be an entry attempt which would give some strength to the upside momentum.

Sequential is in an uptrend with a printed 2, but the count can easily be broken due to range trading.

I expect a short upward movement towards 105 – 105.80 and a reversal for a continuation of the downtrend.

Long-term banking expectations

Banks predict that the downward trend in the dollar will continue until the end of the year, around the levels of 98-100. This supports the idea of a rejection from the 105 – 105.80 resistance zone and continuation of the trend.

Medium-term banking expectations

Forecasts for the current quarter are centered most around the 102.2 level, but since the price was already there at the start of the year, there is likely to be a move higher around 106. Q2 forecasts are most focused around the level 100 which supports bearish scenario in medium term.

Market Profile

An attempt to break out of the Value area could lead to a slight extension of the monthly range to the upside, but high volumes above current levels are likely to be strong resistance to overcome.

Conclusion

Positioning short around the 105 – 105.80 resistance zone will give a good risk/reward ratio in the medium / long term. Right now positioning is risky because the price is in the middle of nowhere. I expect a short rise and then a continuation of the downtrend to make lower lows.