The dollar upturn eventually lost steam yesterday as there was no significant correction in risk assets following new local high in the S&P 500. The dollar index (DXY) dipped below 104 points:

A bearish correction channel continues to form, as mentioned in the previous article. However, the price is trying to press against the upper bound, as some investors are definitely hoping for a surprise from the Federal Reserve next week. This is also indicated by the technical chart of gold, where the price is pressing against the lower bound of the key channel:

The probability of a rate hike, according to rate futures, is decreasing. This week, the disappointing ISM report on the service sector contributed to this. There is hope that the inflation report for May (scheduled for release on June 13) will once again tilt the scales towards tightening:

Officials from the Federal Reserve (Richard Clarida) and the European Central Bank (Klaas Knot), who spoke yesterday, confirmed their intentions to tighten policy. Knot allowed for two more rate hikes in June and July, after which the course of policy will be determined by incoming data. Clarida stated that the tightening cycle is likely not over and that the rate is unlikely to be lowered before the beginning of 2024. 

The Bank of Canada is expected to leave its policy unchanged today, but if there is a rate hike, it will be the second central bank, following the Reserve Bank of Australia, that is not hesitating to tighten. Considering the economic proximity between Canada and the United States, the market may interpret this event as a signal that the Federal Reserve will not lag behind, leading to dollar purchases.