US Dollar Index: Bears Pause Ahead of Fed Chair Powell’s Speech

The dollar index edged higher in early European trading on Thursday, rebounding from its lowest level since December 23, which was reached following the release of the FOMC’s July policy meeting minutes.

The minutes revealed that US policymakers are still on track for a rate cut in September, supported by easing inflation and noticeable weakness in the labor market, reinforcing expectations for this scenario.

The dollar had been in a steep decline over the past four days, reflecting broader bearish trends as traders anticipated a dovish confirmation from the Fed. This suggests that the FOMC’s decisions may have already been factored into the market, leading to a potential ‘sell the rumor, buy the fact’ situation.

Given the deeply oversold conditions, there are indications that a period of profit-taking may be underway. Market participants are now looking ahead to Friday’s key event—the speech by Fed Chair Powell at the Jackson Hole symposium. This speech is expected to provide further insights into the extent and pace of the Fed’s policy easing and set new directional cues.

Powell is anticipated to align with the Fed’s dovish stance, likely contributing to a limited correction before bearish sentiment resumes. Key resistance levels are seen around the 102.00 zone, which includes the former low of August 5 at 101.94 and the declining 10-day moving average at 102.08. These levels should ideally cap the current rally, offering better selling opportunities if Powell’s comments reinforce the dovish outlook. Targets for the bearish scenario include 102.29/18 (December 28 low / 200WMA) and the psychological support level of 100.00.

Conversely, a stronger upward move and a break above the pivotal resistance zone of 102.80/103.00 could challenge the broader bearish trend.

Res: 101.54; 101.73; 102.00; 102.61
Sup: 100.75; 100.29; 100.18; 100.00