Dollar stages significant recovery, reaches fresh 6-week highs

The US dollar has demonstrated a strong recovery, with dollar bulls firmly in control. The technical outlook on the daily chart continues to indicate a bullish trend, supported by a robust rebound. On Thursday morning, the US Dollar Index (DXY)—which measures the greenback against a basket of major currencies—surged to a new six-week high. This upward momentum was further reinforced by the release of strong US economic data and hawkish April FOMC meeting minutes.

Strong Economic Data and Hawkish Fed Minutes

The dollar index extended its gains during US trading on Thursday, approaching the 99.50 mark amid sustained demand following positive economic releases. S&P Global’s US Manufacturing PMI climbed to 55.3 in May, marking the strongest manufacturing expansion since May 2022 and signalling solid growth prospects in the US industrial sector. Additionally, US initial jobless claims came in at 209,000, slightly better than the expected 210,000, indicating continued resilience in the labour market.

Meanwhile, the minutes from the FOMC’s April meeting revealed that many policymakers favoured removing the easing bias and maintaining restrictive policy for an extended period, as geopolitical uncertainties in the Middle East continue to pose inflation risks. Looking ahead, dollar traders will be closely monitoring upcoming speeches from several Federal Reserve officials, including Governor Christopher Waller and Richmond Fed President Tom Barkin.

Dollar Index (DXY) Technical Outlook

The prevailing trend in the dollar remains clearly bullish; however, there is potential for the currency to become overbought in the short term. As of this writing, the DXY trades near 99.50. Therefore, watch for potential pullback signals, as price action around these key levels could set the tone for the rest of the week. Any significant pullback may find support around the 99.20/99.00 and 98.80 levels, with a further decline potentially extending towards the 98.40/98.30 regions. Conversely, sustained strength above 99.50 would reinforce buyer control, with the next resistance levels at 99.80 and 100.00.

 

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