Strong US data boosts the dollar, yet the potential for a more extensive correction remains

Thursday saw the dollar gaining momentum, propelled by robust US economic indicators. Weekly jobless claims held steady, matching last week’s figures, while the Philadelphia Fed manufacturing index surged to a two-year high in April, significantly surpassing both previous releases and forecasts.

Rebounding from a one-week low of 105.54, the greenback rose marginally following Wednesday’s 0.4% decline, which occurred after a retreat from a multi-month high of 106.31.

While the daily chart signals a bullish trend overall, overbought conditions and resistance encountered from the top of the weekly Ichimoku cloud at 106.11 could pose challenges for further upside momentum.

Despite the shallow retracement from the recent peak, finding support comfortably above initial levels at 105.35/14 (Fibonacci 23.6% retracement of the upward move from 103.21 to 106.31), there remains a risk of a deeper correction, especially with initial reversal signals emerging on the weekly chart.

There’s ample room for further downside, with a breach below the 105.35/14 levels potentially exposing robust support zones at 104.76/66 (Fibonacci 38.2% retracement level and trendline support). It’s essential for any extended declines to be contained within this range to signify a healthy correction and maintain the bullish outlook over the longer term.

Res: 105.95; 106.31; 107.00; 107.88

Sup: 105.54; 105.35; 105.14; 104.76