The US dollar advanced to fresh twenty-year highs beyond 104.00 earlier on Monday before retreating amid profit-taking. The USD index briefly rallied towards the 104.20 area to attract sellers ahead of the opening bell on Wall Street amid the overbought conditions.

The greenback turned negative on the day amid some dovish remarks by the Fed officials. Kashkari said the central bank would change its approach if the data came in differently. He also expressed concerns over supply chains.

Moreover, Kashkari added that there might be some evidence of inflation softening. Meanwhile, Bostic highlighted that 50 basis points is a pretty aggressive move, and the bank can stay at that pace. Adding to a less hawkish tone, he said that all options are on the table at every meeting, depending on how the economy responds.

Against this backdrop, the dollar retreated from fresh long-term peaks amid a local downside correction that could push the prices lower in the near term. However, in a wider picture, the outlook for the US currency remains constructive amid persistent concerns about elevated inflation, geopolitics, and the global economy. At this stage, the dollar index may get back below 103.00, but the bullish target of 105.00 remains in place anyway.

The longer-term outlook for the USD is seen as constructive while above the 96.00 mark where the 200-DMA arrives. As the buck fell across the market, EUR/USD bounced marginally after falling below 1.0500. The pair turned positive on the day but still lacks the upside momentum to regain the 1.0600 mark, followed by last week’s highs in the 1.0640 zone. The common currency is likely to resume the decline after a short-lived and modest rebound.