USD Technical Outlook
- US Dollar Index (DXY) is trading near a longer term trend line
- EUR/USD has changed the way ECB . rejected the new low of
US Dollar Technical Analysis: Watch EUR/USD, a shock could be near
The US Dollar Index (DXY) is trading very close to the trend-line dating back to 2001. There are only minimal connecting points to make it a trend-line, but the current rise in the direction of testing the trend-line could become its first significant one. Testing and Confirmation.
A turn at any point from current levels (100.60) to around 102, given the duration of the trend-line, would be considered a test and validation of the trend-line. The buffer may move higher if DXY trades up and pushes hard to close below the 100-102 area on the monthly chart. The bottom line is that DXY is in the warning zone for a reversal on a longer range range.
On Thursday, the euro fell on a dovish ECB through 7 March lows (and 2016’s trend-line), but managed to close back above 10805 for the day and week (Thursday is effectively the last of the week). The day was given the Good Friday holiday) ) The rejection of reducing trade is being seen this week as a potential catalyst for the euro’s bounce.
Given that the euro makes up 57% of the DXY, it certainly has a significant impact on how the index moves. If lower than Thursday is at 10757 then watch for dollar index to move lower here in the coming days.
The market is largely bearish against the euro, and it has been for good reason, but a highly bearish market that fails to break through key levels with a catalyst is prone to take a step back to the other side. This may result in only a relatively small surge, but the stage is set for a stronger reaction.
A top-side reaction out of the EUR will dent the DXY at least to some extent, even if other currencies do not follow suit in trading higher against the USD. The first level to watch on the downside is the top of the range it broke recently, it sits around the 99.41 level.
A hold at the top of the range will be important for DXY if it maintains a generally strong upward bias, as a fall in one range is effectively like falling into an air pocket and seen as leading to the other. Will go In the mid 97’s.
If DXY continues to press higher in the coming days, watch for the trade to become more volatile as a queue that the trend is turning volatile and looking to turn. Also, keep an eye on the March 2020 low of EUR/USD at 10635 as another key inflection point.
US Dollar Index (DXY) Weekly Chart
DXY Daily Chart
DXY Chart by TradingView
EUR/USD Daily Chart
Resources for forex traders
Whether you are a new or experienced trader, we have many resources available to help you; indicator for tracking merchant sentimentquarterly business forecastanalytical and educational webinar held daily, trading guide To help you improve trading performance, and especially for those who new to forex,
— Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter @PaulRobinsonFX