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The Dollar is approaching oversold levels and a rebound could occur – SocGen

The DXY Dollar Index’s 1.8% drop last week was the biggest since the second week of July. Société Générale economists analyze the prospects for the Dollar.

DXY Index Risks Deeper Retracement Towards 102.55

A close below the 200-day SMA (103.62) puts the DXY index at risk of a deeper pullback towards 102.55.

In the most bearish tactical case, a drop towards 100.00 could occur if real yields continue to fall towards 2% and the nominal 10-year Treasury bond breaks below 4.36%/4.33%. However, the dollar is now near oversold levels and a rebound could occur.

The question is whether a rebound in oil prices (with an extension of production cuts by Saudi Arabia and OPEC) would negate confidence in a soft landing for the US economy and speculation of a first rate cut in the first semester of 2004, which would explain the taking of profits from the Dollar.

Source: Fx Street

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