Dollar Within Tight Range Amid Mixed Market Risk Sentiment

Dollar recorded another day of losses Tuesday, with the dollar index edging lower by 0.03% to 96.46 amid a shift in investors’ risk appetite. Benefiting from the improving risk sentiment was the pound (GBP) and the Aussie (AUD), where both rose 0.46% and 0.61% respectively against the dollar.

Market risk sentiment was boosted following encouraging news from the vaccine front, where Moderna said on Tuesday that it could develop a booster shot to fend against the Omicron variant within a short period of time.

Besides that, Bloomberg reported that the US Food and Drug Administration is set to authorize Covid-19 treatment pills as early as today.

Nonetheless, uncertainties towards the progress of Omicron and its impact on the global economy had kept investors’ scepticism in place. As the year sets to end in less than two weeks, market is expected to experience thin trading, with main drivers focusing on the updates of global Covid-19 situation.

As dollar continues to consolidate at higher levels, investors will shift their focus over to today’s GDP and consumer confidence data from the US, and also the Fed-favoured inflation tool, the Core PCE Price Index data on Thursday.

Both the confidence and inflation data will provide further confirmation on the Fed’s decision to raise its interest rate earlier than expected. 

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From the technical front, GBPUSD in its D1 timeframe continues to be traded within a downward trend. However, the RSI indicator is currently showing a positive divergence signal, where momentum continues to build higher but price floor remains near flat around the 1.3200 psychological support. The pair is suggested to experience a technical rebound higher towards the downward trendline, however, a breakout below the 1.3200 support suggests the pair to extend its losses further.