US Dollar Index – Reversal pattern forming on daily chart as strong US Services PMI data lend fresh support to the greenback

The dollar index surged on Wednesday, driven by much stronger than expected US services PMI data (May 53.8 vs 51.0 forecast and April 49.4). This data indicated a return to growth in the services sector, with the May figure reaching a nine-month high, and offsetting negative signals from recent downbeat labor reports (JOLTS and ADP).

This fresh advance broke through strong barriers in the 104.24/37 zone (converged 100/200 DMAs, base of thick daily cloud, and 38.2% Fibonacci retracement of the 105.12/103.91 bear leg). A close above these levels is needed to confirm the initial reversal signal, which was generated by Tuesday’s inverted hammer candlestick.

A sustained break higher would expose the next pivot at 104.51 (50% retracement / 10 DMA) and pave the way for further recovery.

However, caution is warranted as the 14-day momentum remains in negative territory, and the heavy daily cloud continues to exert pressure.

Res: 104.77; 104.51; 104.66; 104.83
Sup: 104.20; 103.91; 103.82; 103.65