The US Dollar Index (DXY) on Friday plunged to edge towards the lowest close in 2 weeks. This comes a day after it momentarily plunged to bottom at 96.55.
However, while the December 25, the decline was only temporary (it recovered immediately to close above 97.60) Friday’s plunge appears set to push the DXY to the lowest close since mid-December.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the US Dollar Index is trading at the back of a relatively quiet period in the US financial markets. While trading resumed on December 26, there has not been much data trickling through bar the US jobless claims.
Earlier in the week, durable goods orders for November missed the expectation of 1.5% with -2.0% while durable goods orders ex-transportation came short of 0.2% with 0.0% change. On the other hand, durable goods orders ex-defense beat the expectation of a 0.0% chance with 0.8% while non-defense capital goods orders ex-aircraft missed 0.2% with 0.1%.
On Thursday, the US initial jobless claims for the week ending December 20 beat the expectation of 224k with 222k claims while the continuing claims missed the forecast of 1.691M with 1.719M claims. The MBA Mortgage Applications for the week ended December 20, also disappointed after slipping lower -5.3% versus the previous week’s change of -5%.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the US Dollar Index appears to be experiencing extreme bearish pressure following Friday’s plunge. The USDX is now testing the trendline support just below the 97.00 level to try to trigger a rebound but the bears will look to retain control.
Therefore, the bears will be targeting short-term profits at around 96.79 or lower at 96.57 going into the tail-end of the year. On the other hand, the bulls will hope for a quick rebound towards 97.19 or higher at 97.40.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US Dollar Index appears to be still enjoying a significant bullish bias despite recently dropping off the ascending channel which dates back to the middle of last year. Today’s plunge pushed the USDX below the current level of the 100-day and the 200-day SMA lines, which indicates that the bears could be attempting a trend reversal.
Therefore, the bulls will be targeting long-term profits at around 97.74, 98.46, 99.08 or higher at 99.73. On the other hand, the bears will look to pounce on profits at around 96.57, 96.03 or lower at 95.22.