USD drops sharply on Tuesday despite recovery

The US dollar is about to end Tuesday with a sharp decline across the board. It bounced off daily lows after Federal Reserve officials talking about the possibility of a rate hike during 2016. Despite moving off session lows, greenback is falling sharply about post the lowest close in months against many currencies.

The US Dollar Index, which tracks greenback against its main rivals bottomed today at 94.32 after the release of US inflation data. Afterward it rebounded but the recovery was capped below 95.00. It was trading at 94.70, 0.75% down for the day.

It moved off lows but the DXY is still headed to the lowest close since June 20 and the third decline in a row. It represents an important reversal after reaching 4-month highs back in July. Wednesday could be another volatile day for the US dollar considering that the FOMC minutes will be released.

USD Index technical levels

To the downside, the key support could be seen around 94.20/25 (June 13 low /  Jun 6 & 9 high), 94.00 (psychological) and 93.60  (May 11 low). To the upside, resistance levels could be located at 94.85/90 (Aug 2 low), 95.40 (short-term downtrend line) and 95.70 (Aug 15 high).