The US Dollar Index (DXY) on Thursday advanced to top the 98.20 level after the US confirmed the possibility of lifting trade tariffs. This boosted market optimism with the greenback advancing against rival currencies while the equities markets also ticked higher.
The net impact resulted in a significant gain in the USDX, which extended weekly gains to maintain a short-term bullish outlook heading to the tail-end of the week. The DXY has since ventured into the overbought levels of the RSI indicator in the 60-min chart and returned back to the normal trade range.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the US Dollar Index is trading at the back of a busy period following the latest round of economic data and news on tariff rollbacks. Early in the week, news emerged that the Trump-Xi meeting could be postponed to December. Then on Thursday, it emerged that there is a great likelihood that the US will lift trade tariffs imposed on Chinese goods and thus boosted the market mood.
This news came at the back of key economic figures released during the week. On Tuesday, the ISM non-Manufacturing PMI for October came out positive after beating the expectations of 53.5 with 54.7. The Markit Services and Composite PMIs missed but these proved insignificant in terms of the market impact.
The ISM NY-Business Conditions Index had earlier outperformed expectations of 45.8 with 47.7 while Factory Orders for September missed the expectation of -0.5% change with -0.6%. On Thursday, Unit Labor Costs beat the expectation of 2.2% with 3.6% while non-Farm Payrolls Productivity missed the consensus estimate of 0.9% with 0.3%.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the US Dollar Index appears to have recently bounced off overbought levels pulling back to trade within the normal trading zone of the RSI indicator in the 60-minute chart. The USDX continues to trade in an ascending cyclical pattern after bottoming at around 97.10 late last week.
Therefore, the bears will be targeting short-term profits at around 98.00 or lower at 97.81 going into Friday while the bulls will look to ride the current upward momentum towards 98.24, 98.42 or higher at 98.64.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US Dollar Index appears to have recently bounced off bullish trendline support in an ascending channel, which indicates a long-term bullish bias in the market sentiment. This bull-run extends back to April 2018 and could continue through the end of this year.
Therefore, the bulls will be targeting long-term profits at around 98.67, 99.11 or higher at 99.73. On the other hand, the bears will be hoping for a quick pullback below the trendline support towards 97.61, 97.14 or lower at 95.85.