The US Dollar Index (DXY) on Friday extended the current rally to hit a new YTD high of 99.13 amid positive earnings reports. The dollar index has been on a bullish run since bottoming around 97.40 at the start of the month and now looks to extend those gains towards 99.30.
The USDX still has some room to run up top with the RSI indicator putting it well within the normal trading range despite this week’s rally. The US dollar currency index has now recovered to resume trading within the bigger ascending channel.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the US dollar index is trading at the back of a busy period in the US market. The US market is now at the peak of the earnings season. Several technology giants announced earnings this month. Most of them beat expectations thereby attracting more investors. This has boosted the greenback against rival currencies amid increased dollar inflow.
This week, the US monetary budget sentiment for January edged lower to $-33B down from $-13.3B in the previous period. Analysts were expecting an improved reading of $-11.5B. On Thursday, the initial and continuing jobless claims beat the expectations of 210k and 1.745M, respectively, with 205k and 1.698M. Consumer price index also impressed beating the (YoY) expectation on ex-food and energy and missing out on the (MoM) change in general CPI.
On Friday, the retail sales control group for January missed the expectation of 0.3% with 0.0% while the industrial production for January came short of the (MoM) estimate of -0.3% with -0.2%.
The Dollar Index Technical Analysis (the 60-min Chart)
Technically, the dollar index appears to have recently bounced off the border to the overbought levels of the RSI indicator. This could trigger a short-term pullback as the bulls move to take profits. The dollar index also appears to be enjoying strong trendline support just above the 100-hour SMA which limits downside movement.
Therefore, the bulls will be targeting short-term profits at around 99.23 and 99.24 levels. On the other hand, the bears will be looking to pounce on pullback profits at around 99.01 or lower at 98.89.
The Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US dollar index appears to have recently made a bullish recovery after a temporary downward movement. The USDX has now returned to trade within the wide ascending channel amid increased bullish pressure. This has propelled the DXY to overbought levels of the RSI indicator in the daily chart. A pullback could be in the making.
Therefore, the bears will be targeting pullback profits at around 97.85, 97.10, or lower at 96.44. On the other hand, the bulls will look to strike profits at around 99.71 or higher at 100.32.