The US dollar currency index on Thursday plummeted to a new weekly low of about 92.90 before recovering later to close above 93.00. The USDX continues to trade within an ascending channel formation in the 60-min chart.
Thursday’s sharp fall drove the DXY below the 100-hour moving average. However, the late rebound prevent the currency index from slipping to the oversold conditions of the 14-hour RSI. Therefore, the rebound could continue on Friday.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the DXY is trading at the back of a busy period in the US market. This week, US stocks pulled back amid fears about Chinese contagion. The Chinese real estate company Evergrande’s collapse threatened to affect global markets, with the US no exception. This pushed the USDX lower as all the major US indices lost ground. However, the markets appeared to recover in mid-week before Thursday’s sharp decline.
On Thursday, the preliminary US Markit Manufacturing PMI, the Services PMI, and the PMI Composite all missed expectations. Moreover, the initial jobless claims and the continuing claims also came higher than expected, adding pressure to the US dollar currency index. Earlier in the week, the Federal Reserve kept the base interest rate unchanged at 0.25, while building permits and housing starts for August beat expectations.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the DXY appears to be trading within an ascending channel formation in the 60-min chart. Despite plunging on Thursday, it recovered late on to return to the normal trading zone of the 14-hour RSI.
Therefore, the bulls will be looking to push the current rebound higher towards 93.27 or to 93.50. On the other hand, the bears will target extended declines at around 92.83 or lower at 92.63.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the USDX seems to be trading within a sharply ascending channel formation. This indciates a strong long-term bullish bias in the market sentiment. It has recently rallied to trade closer to the overbought levels of the 14-day RSI.
Therefore, the bulls will be looking to ride the current bull-run by targeting profits at around 93.79 or higher at 94.60. On the other hand, the bears will target long-term profits at 92.37 or lower at 91.55.