COMMENT-Where dollar closes this week after the Fed critical

Where the U.S. dollar closes in relation to a major broken technical level at the end of this week is key to its direction.

The dollar remained firm on Wednesday ahead of a much-anticipated rate decision by the Federal Reserve later in the session.

The USD index, which tracks the dollar versus a basket of six currencies, last week managed to break the 105.367 Fibo, a 38.2% retrace of the 114.780-99.549 (2022 to 2023) fall. Despite this it failed to end the week above this level.

A close at the end of this week above the 105.367 Fibo is needed to spark a bigger extension higher through the 2023 105.880 peak. That would increase the likelihood of the rump of speculative dollar shorts finally throwing in the towel.

Conversely another failure to register a weekly close above the 105.367 Fibo point to a bull trap. A bull trap is set when a market breaks above a technical level but subsequently reverses and is usually a sign of a reversal.

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