The US Dollar Index (DXY) rebounded on Friday trading session after setting a new 2-week low of about 96.68 on Thursday.
This rebound comes during a period when the USDX has been trading on a sideways movement after ending the June-July rally last week.
After today’s rebound, the US Dollar Index now appears to be approaching overbought levels in the Relative Strength Index Indicator but there is still room to run before it can begin to experience strong resistance.
The US Dollar Index (DXY) Fundamentals Overview
From a fundamental perspective, the US Dollar Index (DXY) is trading at the back of several economic reports and events. This could explain the choppy movement of the USDX this week.
On Friday, the Michigan Consumer Sentiment Index missed expectations by a single basis point coming in at 98.4 compared to a forecast of 98.4 points.
This followed previous economic reports that included Initial Jobless claims which were in line with expectations and continuing Jobless claims which edged higher as reported on Thursday.
In addition, the latest statement from the Federal Reserve was interpreted by the market as a signal to a potential rate cut this year, and this weighed on the greenback.
The US Dollar Index (DXY) Technical Analysis (the 60-min Chart)
From a technical perspective, the USDX appears to be trading within a sideways channel coming off an ascending wedge. This could imply exhaustion in the DXY’s most recent bull run with the bulls stepping in to take some profits.
Following today’s rebound, the bears will be looking forward to the next pullback going into next week and they could target profits at around 96.78 points level. On the other hand, the bulls will hope that the current rally continues towards the 97.41 level.
The US Dollar Index (DXY) Technical Analysis (the Daily Chart)
In the daily chart, the US Dollar Index appears to be still experiencing some bearish bias, albeit just, given the almost flat ascending channel.
The Relative Strength Index Indicator down below supports this scenario as it is pegged dead center, which could imply a continuation of the current trend.
In summary, both the bulls and the bears will look to battle it out for control in the long-term but it could all come down to the type of signals the US economic data send to the market in the coming weeks and months.