FX traders' demand for the U.S. dollar is being fuelled by continued market uncertainty. The USD index, which tracks the dollar versus a basket of six currencies, could overcome key technical resistance at 96.275. That could see the dollar register an even bigger rise in coming sessions.
The dollar edged higher on Tuesday as investors bought safe-haven currencies amid tensions between Russia and the West over Ukraine while awaiting the outcome on Wednesday of the Federal Reserve's two-day policy meeting.
The speculative dollar long has shrunk, giving remaining dollar longs the space to regain the initiative and take the greenback higher in coming sessions. The possible upside room is due to a likely reduction of offers and sell stops associated with those speculative longs.
The USD index is on course to break above the daily cloud top that is currently at 96.275, a close above which would unmask the 2021 96.938 2021 peak for a retest.
(Martin Miller is a Reuters market analyst. The views expressed are his own) ((firstname.lastname@example.org))