The US dollar index (DXY) on Thursday rallied to hit a new 7-week high of about 94.60 before pulling back late on to settle at 94.30. The USDX made a bullish breakout from a sideways channel at the start of the week. It now appears to be suffering momentum exhaustion after a week of gains.

Thursday’s late pullback prevented the currency pair from crossing to overbought levels of the 14-hour RSI in the 60-min chart. The pair remains pegged several levels above the 100-hour and the 200-hour SMA lines.

The US Dollar Index Fundamentals Overview

From a fundamental perspective, the US dollar currency index is trading at the back of a relatively quiet period in the US market. It has been a less active week heading into the final week of the third quarter of 2020. Very few companies reported earnings this week. However, beginning in two weeks things could get a little busier in the market. This could trigger a rapid run in the DXY. 

From the perspective of economic data, the US initial jobless claims for the week ending Sep.18 missed the expectation of 843k with 870k. The continuing claims for the preceding week also came in higher than expected with 12.58M versus 12.339M. On the other hand, Aug. New Home Sales grew 1.011% (MoM) beating the expected change of 0.89%. Earlier in the week, the preliminary Markit Manufacturing PMI beat expectations while the Services PMI came short of expectations.

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

Technically, the USDX appears to have recently made a bullish breakout from a sideways channel in the 60-min chart. This indicates a shifting momentum in the market to favor the bulls. Thursday’s late pullback halted the upward momentum.

The bears will be looking to capitalize on the pullback by targeting short-term profits at around 94.00 or lower at 93.50. On the other hand, the bulls will look to pounce on profits at around 94.60 or higher at 95.00.

The US Dollar Index Technical Analysis (the Daily Chart)

In the daily chart, the US dollar index continues to trade within a sharply descending channel despite this week’s gains. This indicates a strong long-term bearish bias in the market sentiment. The latest bull-run has pushed the pair closer to overbought levels of the 14-day RSI.

The bulls will look to build on this rebound by targeting profits at around 95.65 or higher at 97.50. On the other hand, the bears will look to retain control by targeting long-term profits at around 93.23 or lower at 91.76.