The dollar index retreats from its recent multi-week high due to US data and warnings of potential intervention from Japan

The dollar index declined on Thursday following slightly better-than-expected US economic data and warnings from Japanese authorities about possible action against the yen’s sharp decline.

The US economy grew by 1.4% in Q1, exceeding the expected 1.3% rise. Weekly jobless claims also fell below expectations, and durable goods orders surged well above forecasts in May. However, traders began to reduce their long positions on the dollar due to concerns about potential intervention from Japan.

Despite this, the pullback from the nearly two-month high has been mild so far and may be seen as a healthy correction. The dollar continues to benefit from increasing political uncertainty in Europe and the Federal Reserve’s stance on maintaining its policy unchanged for an extended period.

The fresh weakness faces initial support at 105.24 (daily Tenkan-sen), with a deeper pullback likely finding firm ground above pivotal supports at 104.95/90 (Fibo 38.2% of the 104.61/105.78 uptrend and daily cloud top) to keep the larger bullish trend intact.

Increased downside risk is expected if the 104.90/70 pivots are lost, which would pave the way for a deeper correction.

Res: 105.78; 106.00; 106.22; 106.36
Sup: 105.24; 104.90; 104.70; 104.31