US Dollar Index Plunges to New 3-Week Lows as US Stocks Fall

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The US Dollar Currency Index on Friday extended the current weekly losses below 98.00 following the latest round of US data. The USDX later bounced back to close just above 98.10. 

The DXY appears to be trading in a descending channel amid increased selling pressure. This follows a 7-week bull-run that culminated with the index trading just below 100 towards the end of last week.

The US Dollar Index Fundamentals Overview 

From a fundamental perspective, the dollar index is trading at the back of an eventful week. US stocks fell during the week with the S&P 500 Index shedding more than 11% before Friday’s late recovery. The US top 500 indexes closed 10.76% off last week’s close. All the other major indices including the NASDAQ Composite and the Dow Jones Industrial Average followed the same trajectory.

During the week, the latest round of economic data came out mixed. The non-defense capital goods orders ex-aircraft beat the expectation of 0.1% with 1.1% while the preliminary annualized GDP fro Q4 was in line at 2.1%. Earlier in the week, the Housing Price index for December and New Home Sales for January beat expectations. On the other hand, preliminary Q4 core personal expenditure missed the (QoQ) estimate. The GDPPI for the period and personal expenditure prices also disappointed.

On Thursday, the initial jobless claims disappointed with 219k versus an expectation of 212k while durable goods orders ex-defense and ex-transportation outshone expectations.

The US Dollar Index Technical Analysis (the 60-min Chart)

Technically, the US dollar index appears to be trading under extreme short-term bearish pressure in a descending channel. Friday’s later recovery prevented it from dropping to oversold levels of the RSI indicator in the 60-min chart. This could trigger a short-term rebound.

Therefore, the bulls will target short-term profits at around 98.32 or higher at 98.50. Pn the other hand, the bears will look to pounce for profits at around 97.78 or lower at 97.58.

The US Dollar Index Technical Analysis (the Daily Chart)

In the daily chart, the USDX still appears to be trading within a slightly rising channel. This indicates the existence of relative long-term bullish bias in the market sentiment. The latest pullback has pushed the US dollar Index back to the normal trading zone off the overbought levels of the RSI.

The bears will be looking to extend the pullback below the trendline support towards 96.90 or lower at 96.27. On the other hand, the bulls will target rebound profits at around 99.13 or higher at 99.86.

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