After reaching a maximum level last week since the beginning of April, the dollar retraced on Monday, previously breaking upward from below a bearish channel that began in October 2022. An interesting idea now emerges of a bullish breakout as an early signal for the dollar reversal:

For EURUSD, a buy signal emerged, at least in anticipation of a short-term upward retracement: the price made a retest of the general ascending trendline, which should generate some bullish pressure. However, the rally of EURUSD since October 2022 is at stake:

Sellers are unlikely to give up so easily, and the price is likely to return to test levels below the trendline. Within this assumption, shorting the pair from 1.09 can be considered.

The US inflation report last week left a mixed impression. While overall inflation was below expectations, the more important core inflation from the Fed's perspective decreased reluctantly in line with expectations (5.5%). The US unemployment report two weeks ago had an inflationary bias (acceleration in wage growth, decrease in unemployment). The University of Michigan Consumer Sentiment Index released last Friday was significantly below expectations (57.7 points against an expected 63 points), prompting a rise in the dollar index from 102.20 to 102.60. Market participants seemed to increase demand for the dollar as a safe haven asset, as weak consumer sentiment increased recession risks.

Two potential factors for a dollar rally this week are Powell's speech on Thursday and a sudden surge in volatility in the stock markets (VIX index near lows since the beginning of 2022). Although the June FOMC meeting is still a few weeks away, markets are pricing in a high probability of a pause, which poses risks of a correction in case of hawkish data or corresponding Powell's comments. If expectations for interest rates are correct, the dollar should strengthen. This week, investors may also pay attention to the final GDP and inflation estimates for the Eurozone for the first quarter and April, as well as the inflation report in Japan, which will be released on Thursday.