Euro Gains against Dollar Likely as DXY Looks Like it Wants to Go Lower

• Dollar index poised for further losses says Reuters market analys
• USD index daily "cloud twist" seen on the charts, could precede further losses
• Overall Dollar structure said to be bearish

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The Dollar index is poised to extend its recent run of losses, according to a new analysis, a move that will offer a near-term boost for the Euro to Dollar exchange rate (EUR/USD).

"FX traders should beware that while the dollar's decline has steadied, it will likely resume a downward trend in the coming sessions, especially as the speculative short position is not large enough to hinder such falls," says Martin Miller, a Reuters market analyst.

The Dollar was broadly steady in midweek trade but this could be a mere respite in the currency's short-term run of losses. Indeed, at the time of writing on Thursday the Greenback is seen edging lower once more.

According to Miller, the Dollar index - a measure of broader Dollar performance against a basket of key pairs - sees its 14-week momentum indicator locked in negative.

EUR/USD constitutes 57.6% of the Dollar index, meaning for the index to extend its downturn EUR/USD would almost certainly be required to appreciate.

"The dollar's fate is also pinned to the movement of the biggest components of its index. The U.S. currency is expected to struggle against the euro and pound, but make gains against the yen as risk appetite rebounds," says Miller.

The USD/JPY accounts for 13.6% of the index, with the GBP/USD holding 11.9%, USD/CAD 9.1%, USD/SEK 4.2% and USD/CHF 3.6%.

The Dollar index market structure is "overall bearish," adds the analyst, "a clean break under last week's 101.910 low will expose the 100.800 2023 base for an eventual probe."

The Dollar index is currently quoted at 102.59, having been as high as 105.83 on March 08. EUR/USD is at 1.0849, having been as low as 1.0524 on March 08.

"The USD index failure earlier in March ahead of the 106.140 Fibonacci level, a 38.2% retrace of the 114.780 to 100.800 (2022 to 2023) drop, continues to cast a shadow over the greenback's outlook," says Miller.

'Cloudy' Technical Indicators

Miller is a technical analyst and his most recent analysis of the Dollar index leads him to say in a midweek note, "things are not looking great for the dollar."

Miller says:

» FX traders should not be fooled by dollar's pause
» USD index daily "cloud twist" circa 103.215, on Thursday, could well attract (see above)
» After the "twist" the cloud will begin to thicken to weigh on the USD index
» USD's fate pinned to biggest components of the index: euro and yen
» EUR/USD chart points to big gains if bulls survive Wednesday
» Dollar up versus yen, risk appetite grows, Japan year end looms