The dollar started the week on a positive note and on Tuesday continues to consolidate around the resistance at 93 points on DXY. Technically, there is a second retest in three weeks of the upper bound of the medium-term wedge pattern, which began to form about a year ago:

Most likely, this signals that buyers are gradually ramping up pressure ahead of the release of the US CPI in July, the upcoming conference in Jackson Hole, as well as against the background of an increase in the number of defensive deals due to the onset of the delta strain in certain regions. Also yesterday, the Fed representatives Rafael Bostic and Eric Rosengren made positive comments for the dollar. Their rhetoric came at a time when the market is quite certain that the Fed will begin to tighten policy this year, but they added a sense of urgency as they said they would prefer a fast approach. This means that the Fed may begin to wind down QE as early as September, if the employment recovery maintains the pace at about the same rate as in July (~1 million new jobs).

The speculation that the Fed may begin to wind down QE in September will definitely provide strong support to the dollar, since the scenario is far from the main one and yet to be factored in asset prices, including USD rate. Today's comments by Fed spokesman Loretta Mester on inflation risks may further clarify the possibility that the Fed will make a sharp hawkish shift in policy in September.

The only economic calendar report that deserves attention today is the NFIB Small Business Optimism Index. Therefore, the risk appetite in the market may now be driven by price movements in the commodity markets, which this week turned out to be significantly worried about demand outlooks. Oil began the week with a decline of more than 3% amid negative news from China related to the spread of the coronavirus. Industrial metal prices also reacted negatively to the heightened risks of new restrictions in China that could affect production. Nevertheless, we observe recovery in commodity prices on Tuesday as newsflow gradually improves.

In addition, the release of the ZEW report on Germany is due today. It is unlikely that the positive surprise will be able to stop the downtrend in EURUSD, as investors are focused on the factor of the Fed's policy. The potential test of 1.17 level in EURUSD will coincide with a breakout of medium-term pattern in DXY, which looks logical, but development of this move will depend on whether the DXY price can gain a foothold above the boundary line: