In the near term, the dollar index needs to overcome the 105.55 intermediate hurdle on the way to 106.00

The US dollar keeps recovering this week after an aggressive slide witnessed on Friday. The USD index briefly dipped below the 105.00 handle before bouncing. Still, the recovery momentum looks too modest and the greenback is yet to regain the 106.00 mark, followed by the 106.85 intermediate barrier.

Dollar demand reemerged as risk demand has abated somehow. After modest gains in Wall Street overnight, Asian equities were mostly lower on Tuesday, with Australia’s equities falling after the country’s central bank raised its key interest rate for the first time since June. European equities opened lower as well, with investors shifting focus to Federal Chair Powell, who is scheduled to speak this week.

As the buck bounced, EURUSD came off recent peaks seen around 1.0755 at the start of the week. The euro has been pressured since Monday while still staying above the key SMAs on the daily chart. Should the common currency fail to hold above 1.0700, the near-term technical outlook would deteriorate somehow. Adding to a more downbeat tone surrounding the euro, ECB vice-president Luis de Guindos said earlier today that the central bank expects an economic contraction or a standstill in the fourth quarter in eurozone.

In the near term, the dollar index needs to overcome the 105.55 intermediate hurdle on the way to the 106.00 mentioned level. A failure to regain this support zone could bring renewed selling pressure to send the US currency back below the 105.00 mark. On the weekly timeframes, the DXY retains bullish tone despite last week’s solid losses. The overall upside momentum would persist if Powell refrains from a dovish tone in the days to come. Otherwise, a deep sell-off could take place in the near term.


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