U.S dollar index long-term technical analysis
Economic recovery card is being played while U.S coronavirus infection slowly decreased as vaccination rate accelerate. Aside from that, the new massive government spending bill also put bullish pressure on the market. It means the massive value of money pumped to push the economy. However, traders are currently watching closely the inflation and the Fed outlook.
Rising inflation could threaten the economic recovery as the Fed might start unwinding the loose economic policy by either rising interest-rate or start tapering. This month, traders will continue to observe the data releases and the Fed FOMC meeting for clues on the U.S dollar index direction.
If there is no change in the outlook and the inflation rate continues unchanged then the U.S dollar index might continue its bearish movement.
The orange box area on the monthly chart produces rejection on the U.S dollar index and we have two bearish months. This month, the index might continue its bearish movement toward the 2018 low. If there is no bounce reaction from the level then traders will expect the index to continue down and test the monthly SMA 200.
No strong expectation on the index’s next direction yet. The bearish pressure continues but no lower low printed yet. The index needs to print a lower low to confirm the bearish trend continuation. On the other hand, if a bounce happens and a higher high is printed above the orange box area then the bearish trend stopped and there is a chance for a bullish reversal.
On the daily chart, the area between 89.60 – 90.00 holding out pretty well against bearish pressure. Without breakout below this area, the U.S dollar index might reverse its direction and start moving upward. At the current time, traders will monitor closely the index reaction near the area.
Trade plan (For U.S dollar pair)
It is a vital time for the U.S dollar index. If a bounce will happen then it will happen from the 89.60 – 90.00 area. However, if the index failed to bounce and a new lower low printed then traders will be assured that the trend will continue bearish.
U.S job data this week and the Fed FOMC meeting in the middle of the month might provide clues on the index direction. It is better to wait and see for now if traders hold no positions in the U.S dollar.