After the dollar fell to a near 2-month low, the bearish signal strengthened! Maintaining this week's negative outlook

After last week's biggest weekly decline since July, the dollar kicked off a new week on a downward trajectory.

On Monday (November 20), the dollar index fell to its lowest level in the past two months, reaching a low of 103.36, while sending a bearish signal based on recent economic developments.

Confidence that the Fed has finished raising interest rates has solidified following last week's lower than expected inflation data, so markets are turning their attention to when the Fed might start cutting rates.

Although Federal Reserve officials have recently made dovish remarks in support of a weaker dollar, market pricing has not fully factored into officials' statements, suggesting that tightening could be restarted if necessary.

As the view that the Federal Reserve will transition to the pivot stage of interest rates gains traction, there are still some indications that the Fed may start cutting rates earlier, which could affect risk appetite.

Meanwhile, the Fed is expected to release its last meeting notes tomorrow, which will leave interest rates unchanged for the second time.

Judging from last week's trend, the impact of meeting notes on the dollar is expected to be limited.

Despite escalating geopolitical concerns, the dollar index was stable in October, but it has now entered a downward trend due to increased risk appetite due to widening regional tensions and slowing news flow.

(Dollar index trend chart)

From a technical perspective, the dollar traded sideways for a month from September to October, and then entered a correction trend.

The index had tried to hold the 105 support level for a while, but lost support in the 104.2 range after a sharp drop last week and is moving towards the main support area in the 102.5-103 range, while maintaining the negative outlook for the week.

The region is likely to be tested this week. If there is a breakout, the index could fall to the first half support level of 101.

On the other hand, the short-term moving average continues to suggest that the decline is likely to continue due to being in the reverse cross phase.

From a weekly perspective, the Stochastic Relative Strength Indicator (RSI) indicates that there is still more room for decline. In the short term, the indicator has begun to reflect oversold conditions. In order to make a possible reversal, it becomes important to maintain the middle support level of 103.4.

However, there is little data to suggest dollar demand is surging and the decision by the Opec meeting to cut oil supply as oil prices fall this week could lead to short-term reactive buying of the dollar.

From the current situation, the index is more likely to continue its adjustment phase.

EUR/USD rose to the 1.09 range in the process. USD/JPY fell sharply on the weakness of the dollar and started the week with a seller sell-off, falling to the 147 range. Gold turned to the upside last week and started the week flat.

EUR/USD: Will the uptrend continue?

The euro rallied against the dollar last week on rising expectations that the Federal Reserve would start cutting interest rates sooner, and Friday's release of eurozone inflation data below 3 per cent was another factor supporting the pair.

(EUR/USD chart)

The EUR/USD recorded its highest gain on the day of the release of US CPI data, reaching a key resistance point compared to the last downtrend this week, and the price move exceeded the uptrend.

This week, the resistance level of 1.093 corresponding to the potential support level (Fib 0.618) becomes very important, and if it breaks through this resistance level, the pair may reach the next resistance level 1.1 corresponding to the potential support level (Fib 0.786). Otherwise, we can see that the EUR may decline to $1.083.

USD/JPY retreated, focusing on the lower end of the rising channel

The USD/JPY has been in a rising channel since the beginning of the year, but began to come under pressure throughout November from last year's high of 151. Under this pressure, the USD/JPY fell sharply, and the US data triggered a weakening of the dollar.

(Dollar/JPY chart)

Although the appreciation of the yen has accelerated in recent days, it can be seen that its trend is still continuing in the upward channel.

Therefore, the important price level at which a trend reversal could occur could be 146. A weekly close below this value could trigger a trend reversal in USD/JPY.

In addition, today's test of the 148.3 level as a short-term intermediate support is also on the agenda. Although the daily close above this value indicates that the pair remains resistant, a possible reaction purchase could cause the pair to rise to the 150 level.