The US Dollar Index (DXY) has pulled back this week after a 2-week rally saw it climb from below 96.00 points to trade at 97.60. The pullback has brought it down to around 96.00, where it looks to consolidate weekly losses.
The US Dollar Index measures the performance of the greenback against a basket of six rival currencies and is usually affected by weak US economic data.
The gains at the end of last week were party due to a strong non-farm payrolls data while this week’s losses mirror the dovishness in Fed Chair Powell’s statement on Wednesday.
The US Dolla Index (DXY) Fundamentals Overview
From a fundamental perspective, the US Dollar Index (DXY) is trading at the back of a mixed week of economic events in the US.
On Wednesday, the US Federal Reserve Chair Jerome Powell hinted a cautious approach to interest rates while at the same time pointing the impressive performance of the labor market.
And yesterday, the US 4-Week Bill auction-rate edged lower to 2.135% down from 2.210% in the previous period while the 30-Year Bond Auction added a few percentage points to 2.644^ up from 2.607% in the previous period.
On Friday, traders will be looking forward to the Producer Price Index data at around 12:30 GMT and later on Fed’s Evans speech.
The US Dollar Index (DXY) Technical Analysis (the 60-min Chart)
From a technical viewpoint, the USDX appears to have recently made a trend reversal after a significant bull-run. It now looks to be on its way to completing the XABCD pattern formation ending with a bearish wave.
Going into next week, the bulls will be targeting profits at around 97.15 in the short-term or a little higher at around 97.41. On the other hand, the bears will look to pounce for profits at around 96.80 or a little lower at 96.59.
The short-term RSI in the 60-min chart shows a continuation of the current bearish movement is highly likely.
The US Dollar Index (DXY) Technical Analysis (the Daily Chart)
In the daily chart, the USDX again appears to be strongly under a bearish bias sentiment with the latest rebound being restricted by the trendline resistance line.
The RSI also shows that the current movement could continue for the next few days with more room available down below.
In summary, the US Dollar Index (DXY) appears to be under intense bearish pressure following last week’s rally. And given the economic events of this week, there appears to be nothing much to support a rebound.