The dollar index is on the back foot ahead of this week’s key economic releases

The dollar traded within a narrow range during the Asian and early European sessions on Monday, but the near-term outlook remains bearish. This is influenced by Friday’s 0.3% drop and the formation of a bearish engulfing pattern on the daily chart.

Rising negative momentum adds to the downside risk. However, a close within the daily cloud (with the top at 104.65) and a firm break below the 10-day moving average (10DMA) at 104.57, which has protected the downside for the past four sessions, is needed to generate a fresh bearish signal and expose the next pivotal supports at 104.35/20 (61.8% Fibonacci retracement of 103.67/105.03, daily cloud base, bull-trendline, reinforced by the 200DMA).

Conversely, repeated closes above the daily cloud top would ease immediate downside pressure and keep the prospects for a fresh recovery alive, as the rising daily cloud continues to support the uptrend from the May 16 low of 103.93.

With the US market closed for a holiday today, lower volumes may limit action. Focus will shift to the release of German and EU inflation data, as well as the US Personal Consumption Expenditure (PCE) price index, the Fed’s preferred inflation measure. These releases will provide fresh signals to the US and European central banks and influence the dollar’s performance in the coming days.

Res: 104.77; 105.03; 105.15; 105.43
Sup: 104.35; 104.20; 103.93; 103.80