USD INDEX – Bears pause following Friday’s steep decline

The U.S. dollar index edged slightly higher on Monday morning, recovering modestly after a sharp 1.5% drop on Friday — its largest single-day loss since April 10.

The selloff followed weaker-than-expected July nonfarm payrolls data, a steep downward revision to June’s figure, and a rise in the unemployment rate. These developments renewed speculation about a potential Fed rate cut in September, and possibly another before year-end — a shift in tone after policymakers had just ruled out imminent easing at last Wednesday’s meeting.

Friday’s decline, which followed a failure to break above the key 100.00 psychological level, saw the index fall into the thickening daily Ichimoku cloud and reach the 50% Fibonacci retracement of the recent rally from 96.82 to 100.04 — a bearish signal.

Fresh bearish momentum found temporary support at the 50% retracement level, which also aligns with the daily Tenkan-sen, helping to limit further downside for now. Monday’s modest rebound has partially eased immediate pressure, but upside remains capped.

In the near term, price action may stay range-bound while trading within the Ichimoku cloud (currently spanning between 98.00 and 99.00). A clear break above or below the cloud would be needed to confirm a stronger directional move.

Looking further ahead, the broader outlook for the dollar remains bearish. Last week’s failure to sustain gains above 100.00, combined with a weekly candlestick featuring a long upper shadow and prevailing negative signals from weekly indicators, suggests that the broader downtrend is still intact.

In addition to growing expectations for a more dovish Fed, concerns over the resilience of the U.S. economy — highlighted by Friday’s disappointing jobs report — and rising political uncertainty are likely to further weigh on the dollar while supporting safe-haven demand, particularly for gold.

Res: 98.81; 99.08; 99.28; 99.72
Sup: 98.36; 98.03; 97.58; 97.22