Greenback Rally Faces ‘Vital Resistance,’ However Bulls Will Maintain The Line By



© Reuters.

By Yasin Ebrahim – The dollar is approaching ‘critical resistance’ that may force some to take profit, but this isn’t the time to turn bearish as any dips will likely be bought paving the way for further upside, experts say.

The , which measures the greenback against a trade-weighted basket of six major currencies, rose 0.22% to 93.99.

The dollar is approaching “critical resistance” of 94.47 to 94.76, and could be set for “some consolidation,” Commerzbank (DE:) said in a note.

While the short-term path for dollar is likely paved with resistance, the overarching backdrop for the dollar is favorable as further positive economic data will likely strengthen the Federal Reserve’s case to tighten its monetary policy measures.

Data on Tuesday showed the rose to 61.9 from 61.7, confounding economists’ expectations for a decline to 59.9.

In sign that inflationary pressures remain elevated, the prices paid component of the ISM non-manufacturing report showed prices paid rose to 77.5 from 75.4.

“Prices paid remains at a very high level, and it is consistent with a host of other metrics that reflect elevated prices pressures,” Jefferies (NYSE:) said in a note.

The ongoing pace of inflation could force the Fed to hike rates sooner than many expect.

“[A]gainst the backdrop of elevated inflation and rapidly rising energy costs, many market participants are skeptical the FOMC will be able to maintain these low rates for another year, let alone two,” Stifel said in a note.

As well as expectations for tighter monetary policy, the dollar has been boosted by a rise in safe-haven demand in the wake of difficulties in China that are set to continue.

“The headwinds to risk sentiment stemming from China’s property sector are far from over,” ING said. “In FX, we think this will continue to provide reasons not to turn any bearish on the dollar…”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.