The experts at the MUFB Bank believe that the recent pullback in the USD is a sign that more downside is coming for the U.S. dollar! That's why they believe that caution is needed by those who are chasing upside in the greenback. For now, the short-term trend for the USD seems to be down due to a lot of different reasons.
The analysts have even warned that the CPI report from the U.S. will become another factor that can put downside pressure on the USD.
In the foreign exchange market, it was a volatile week for the USD and other major currencies. During the first few days, the dollar showed its muscles by making some strong bullish moves against other currencies.
EUR/USD made a new low around 0.9864 level, and the GBP/USD also dropped to 1.1406 due to the USD strength. Similarly, the USD/JPY made new highs at 144.99 while the USD/CNY made a high of 6.9799.
However, this strong performance was followed by a sharp correction in the USD. In fact, the sell-off in the USD pairs was one of the biggest selling pressure faced by the dollar index.
Keeping in view the recent sell-off in the USD, it seems that a more safe approach is to be cautious of the US dollar. The experts believe that this could be just a short-term correction, but the risk of a further drop can't be fully discounted either.
The upcoming CPI report from the USA will also dictate the next direction for the USD. A poor reading could send the USD lower, while a positive reading may lend a little bit of report.
While looking at the USD, let's not forget that inflation is soaring in the USA, and there are significant signs of economic slowdown. On top of that, the rising energy prices have also upset the budget of many American citizens, which will, in turn, slow down retail sales.