The dollar remains strong as expectations grow for the Federal Reserve to take a more hawkish stance

The dollar maintained its strong tone and reached new multi-month highs early on Wednesday, following a 0.56% surge fueled by stronger-than-expected U.S. data on Tuesday.

The U.S. employment cost index increased more than anticipated during the first quarter, indicating inflationary pressures. This development dampened expectations regarding the timing and extent of potential Federal Reserve rate cuts.

Traders are awaiting key U.S. data releases this week, including the Fed’s rate decision, ADP, JOLTS, and the NFP labor report. These will provide more insights for U.S. policymakers and shape their future decisions.

A hawkish stance from the Fed at the conclusion of its two-day policy meeting would reinforce the notion that central bankers are not in a rush to begin cutting rates without a clear view of inflation and economic conditions, thus bolstering the dollar further.

The technical outlook on the daily chart remains solidly bullish, supporting the dollar’s overall positive stance. Bulls broke through the previous peak at 106.31 (April 16), with a clear break pointing towards key medium-term targets at 106.96/107.03 (November 11/October 3 tops).

The rising 10-day moving average (105.82) offers initial support and protects lower pivots at 105.38/25 (20-day moving average/April 26 low), where deeper dips should find strong support to maintain the larger bullish trend.

Res: 106.36; 107.00; 107.88; 108.62

Sup: 105.82; 105.38; 105.25; 105.00