Dollar Index Outlook: Dollar’s Recovery Could Extend Towards Key Fibo Barrier at 94.03

Technical analysis of Forex market

The dollar eased from recovery high (93.06) in immediate reaction on better than expected US jobless claims data.

Initial claims for state unemployment benefits were 881K for the week ended on 29 Aug, in comparison to previous week’s figure at 1.01M and 950K forecast and continuing claims fell below 14M for the first time since mid-Apr.

Upbeat results instantly boosted risk sentiment, however the action is likely to be limited as jobless claims remain extraordinarily high, with growing signs that recovery in the labor market is losing traction on the second wave of Covid-19 and lack of agreement about the new US stimulus package.

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Adding to dollar positive signals were today’s PMI data from the EU and UK which warn that post-pandemic recovery in services sector is running out of steam.

Dollar’s recovery emerged after larger bears were trapped under Fibo support at 91.83 (76.4% of 88.14/103.80) and reversal was signaled by hammer candlestick on daily chart.

Rebound accelerated as shorts were squeezed on profit-taking, with north-turned daily indicators supporting scenario.

Bulls pressure initial Fibo barrier at 93.14, violation of which would expose pivots at 93.96 (3 Aug lower top) and 94.03 (Fibo 38.2%).

Today’s close above 10DMA (92.74) is needed to confirm fresh bullish bias

Res: 93.06; 93.46; 93.96; 94.03
Sup: 92.75; 92.43; 92.22; 92.09