Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Dollar Rally Faces 'Critical Resistance,' But Bulls Will Hold The Line

Published 05/10/2021, 21:14
Updated 05/10/2021, 21:14
© Reuters.

© Reuters.

By Yasin Ebrahim

Investing.com – The dollar is approaching 'critical resistance' that may force some to take profit, but this isn't the time to turn bearish as any dips will likely be bought paving the way for further upside, experts say.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose 0.22% to 93.99.

The dollar is approaching “critical resistance” of 94.47 to 94.76, and could be set for “some consolidation,” Commerzbank (DE:CBKG) said in a note.

While the short-term path for dollar is likely paved with resistance, the overarching backdrop for the dollar is favorable as further positive economic data will likely strengthen the Federal Reserve’s case to tighten its monetary policy measures.

Data on Tuesday showed the ISM services index rose to 61.9 from 61.7, confounding economists’ expectations for a decline to 59.9.

In sign that inflationary pressures remain elevated, the prices paid component of the ISM non-manufacturing report showed prices paid rose to 77.5 from 75.4.

“Prices paid remains at a very high level, and it is consistent with a host of other metrics that reflect elevated prices pressures,” Jefferies (NYSE:JEF) said in a note.

The ongoing pace of inflation could force the Fed to hike rates sooner than many expect.

“[A]gainst the backdrop of elevated inflation and rapidly rising energy costs, many market participants are skeptical the FOMC will be able to maintain these low rates for another year, let alone two,” Stifel said in a note.

As well as expectations for tighter monetary policy, the dollar has been boosted by a rise in safe-haven demand in the wake of difficulties in China that are set to continue.

“The headwinds to risk sentiment stemming from China’s property sector are far from over,” ING said. “In FX, we think this will continue to provide reasons not to turn any bearish on the dollar…”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.