The US greenback is overbought and will weaken to latest lows as the following Fed assembly looms, strategist says

• The US greenback is overbought and will weaken amid expectations for a Fed hike in June, an FxPro strategist mentioned.
• It has continued to rally in Could, nevertheless it may decline again to latest lows quickly.

The US greenback has climbed over latest weeks however with may see weak point forward of the Federal Reserve’s June coverage assembly, in response to an FxPro strategist.

In a Tuesday be aware, Alex Kuptsikevich, FxPro senior market analyst, wrote that the greenback is at the moment overbought. The US Greenback Index has gained about 3.4% from its early Could lows, and has hovered round 104.2 over the previous 4 buying and selling periods.

That is as a result of the chances of one other Fed price hike on the June 13-14 assembly have jumped to about 64% from almost zero in the beginning of the greenback’s final rally in early Could, Kuptsikevich mentioned.

One other price hike, the strategist famous, may appeal to capital into the greenback after a lot of it fled in the course of the regional banking disaster.

However the Fed may very well be getting extra cautious about future price hikes, he added because the signs of the banking disaster have eased with out the “illness” itself being cured but.

And the greenback is flashing technical indicators it may see a sell-off quickly, in FxPro’s view, because it’s entered the “over-bought territory” on the every day RSI, a price-movement gauge.

“Technically, the sign for the start of the correction will probably be a decline on the finish of the day with a return to regular territory,” Kuptsikevich mentioned. “If this occurs from the present stage of 104.20, it might be a decrease native excessive than the March peak above 105. In flip, such a reversal can be a motive to search for the Greenback Index to rewrite native lows within the coming weeks, approaching or falling under 100.”

The final time the US Greenback Index edged close to 100 was April 12.

The euro-dollar price is buying and selling at about the identical stage it was in the beginning of the yr and one yr in the past, the strategist identified, whereas the dollar-yen price is at highs not seen since final November.