The dollar index holds in red for the third consecutive day and extends pullback from new 20-year high, to hit one-week low in European trading on Tuesday.
The sentiment softened after US policymakers cooled down the speculation that the US central bank may opt for a massive 1% hike in the policy meeting later this month, after the latest inflation report showed that consumer prices continue to rise despite several rate hikes in past few months.
FOMC members said that the central bank will likely stick to its decision for 0.75% hike that prompted traders to collect profits, pushing the price lower.
The latest comments that the European Central Bank will discuss whether to raise interest rates by 0.25% or 0.5% at their meeting on Thursday, to fight soaring inflation, lifted the euro and added pressure on dollar.
Daily chart studies show strong loss of bullish momentum, as pullback closed below 10DMA (107.43) on Monday and extended through pivotal Fibo support at 106.94 (38.2% of 103.40/109.12 upleg), generating bearish signals.
Bears pressure next key Fibo level at 106.26 (50% retracement) break of which would further weaken near-term structure and risk deeper drop.
However, worsening global economic situation in light of expected deterioration of gas supplies for Europe and signs of further slowdown in economic activity, remain supportive for safe-haven greenback that may limit dips.
US housing data are in focus today and expected to provide fresh signals.
Res: 106.94; 107.44; 107.77; 108.40.
Sup: 106.26; 105.98; 105.59; 105.35.
