As the US Dollar (USD) rebounds near the 103.00 mark on Tuesday, following improved market sentiment and absence of news on the Middle Eastern conflict, investors are cautious about the Greenback’s potential trajectory. However, the high expectations of a rate cut by the Federal Reserve (Fed) could limit the USD’s gains throughout the day.
The market is currently pricing in a 100 basis points rate cut by the year’s end, reflecting concerns about the US economic outlook and potential recession fears. Officials are advising against overreacting to single data points, but the sentiment remains cautious.
Analysis:
The USD’s recovery on Tuesday is attributed to improved market sentiment and lack of negative news, but the potential upside is limited by dovish bets on the Fed’s rate cuts. The market anticipates a rate cut in September and a total of 200 basis points easing by the end of the year, which could weaken the USD further. Technical indicators suggest a bearish outlook for the USD, with resistance levels at 103.00, 103.50, and 104.00, and support levels at 102.50, 102.20, and 102.00.
Investors should closely monitor incoming data to assess the Fed’s easing narrative and its impact on the USD’s value in the coming days.