The US Dollar Index (DXY) on Friday extended the current weekly gains towards 98.00 before pulling back late on. The Dollar Index has been on a cyclical bullish run since bottoming at about 97.40 earlier this week.
The USDX has now rallied above both the 100-hour and the 200-hour SMA lines in the 60-min chart. It also crossed over to the overbought region of the RSI indicator before the late pullback. This indicates a short-term bullish bias in the market sentiment.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the dollar index is trading at the back of a relatively quiet period in the US market compared to the previous week. The US-China trade deal was sealed last week and the Persian Gulf conflict has calmed. Therefore, the majority of the market risk is now attached to key economic data. And based on the latest round of data, it has been largely mixed. This makes the safe-haven US dollar more attractive to investors.
On Wednesday, the Chicago Fed Activity Index for December narrowly missed the expected change of -0.30 with -0.35. On the other hand, Existing Home Sales and Existing Home Sales change beat the (MoM) expectations of 5.43M and 1.2% with 5.54M and 3.6%, respectively. The House Price Index for November came in line with the expectation of 0.2%, unchanged from the previous period.
On Thursday, the continuing and initial jobless claims beat the expectations of 1.746M and 215K claims with 1.731M and 211k. And on Friday, the US Markit Manufacturing PMI missed expectations while Services and Composite PMIs outperformed.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the US dollar index appears to be experiencing a short-term bullish bias in the market sentiment. The greenback continues to strengthen amid increased risk-off trading in the market. However, the USDX appears very close to crossing over to the overbought levels in the RSI indicator. This could trigger the next pullback.
Therefore, the bulls will be targeting short-term profits at around 97.94 or higher at 98.04. On the other hand, the bears will target pullback profits at around 97.75 or lower at 97.66 going into the weekend.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US dollar index appears to be trading in a descending channel off a wider ascending channel. This indicates an attempt by the bears to take long-term control of the USDX. However, with the recent bull-run, the bulls look determined to cling on.
Therefore, the bulls will be targeting long-term profits at around 98.70 or higher at 99.50. On the other hand, the bears will look to maintain persistent pressure by targeting profits at around 97.09 or lower at 96.02.