As the dollar attempts a comeback, are markets wrong about the Fed?
XM Group | May 17, 2023 11:38AM ET
However, the scale of any downside moves may be a little more difficult to predict. As things stand, the uncertainty around the outlook for the global economy and Fed policy is putting a floor under the greenback. But should some of the clouds start to lift and the monetary divergence paths become clearer, with the Fed pivoting before the ECB and the Bank of Japan only just starting to tighten policy, the dollar could suffer more substantial losses.
But even then, the road to all the way down to the January 2021 trough is a very long stretch for the dollar index. The 61.8% Fibonacci retracement of the uptrend that began from this low and ended at a two-decade high in September 2022 may be a more realistic target for the bears.
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