Colombian Peso's Rally Stalls: Dollar Index Recovery Sparks Correction In USD/COP

(MENAFN- The Rio Times) The Colombian peso lost momentum against the US dollar over the last 24 hours, with the exchange rate rising from 3,949 to 3,980 COP per USD by the morning of July 4, 2025.

This move marked a reversal from the previous session's lows and signaled renewed dollar strength after a period of sustained peso appreciation. The session began with the peso holding firm, but as trading progressed, the dollar gained traction.

Market data confirmed the USD/COP pair moved higher, reflecting a shift in sentiment. The dollar's recovery aligned with a modest rebound in the US dollar index (DXY), which stabilized after recent declines.

The DXY's movement provided support for the greenback across emerging market currencies, including the peso. Technical analysis of the daily chart showed the USD/COP pair bouncing from oversold conditions.

The price moved away from the lower Bollinger Band, and the relative strength index (RSI) edged up from deeply oversold territory, suggesting a pause in the prior downtrend.



The moving average convergence divergence (MACD) remained negative, but the histogram showed signs of contraction, indicating that bearish momentum was waning.
USD/COP Rebounds Amid Profit-Taking and Fed Uncertainty
The price action also found support near 3,950, a level that previously acted as a floor, and resistance emerged near 4,000, where sellers re-entered the market. Fundamental factors contributed to the shift.

Traders cited a combination of profit-taking on peso positions and renewed demand for dollars as key drivers. Some market participants pointed to uncertainty ahead of upcoming US labor data, which could influence Federal Reserve policy expectations.

In Colombia, the central bank 's dovish outlook and expectations for lower interest rates later in the year tempered enthusiasm for further peso gains.

Volumes increased as the exchange rate approached the 3,950 level, with stop-loss orders and algorithmic trading amplifying the move higher.

No major news or policy announcements emerged overnight, but the market's reaction suggested a recalibration of risk appetite and positioning. The broader context remains one of volatility, with the peso 's recent strength giving way to a corrective move as the dollar found support.

The technical backdrop now points to a potential consolidation phase, with traders watching for confirmation of a new trend or a resumption of the previous decline. In summary, the US dollar strengthened against the Colombian peso, reversing part of the recent losses.

The move reflected both technical and fundamental factors, with market participants adjusting positions ahead of key economic data. The next direction will likely depend on US macroeconomic releases and signals from central banks, as well as local developments in Colombia.

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