The US Dollar Index (DXY) on Monday pulled back off yearly highs of about 90.95 to trade at around 90.76 ahead of President-elect Joe Biden’s inauguration ceremony. The USDX appears to be trading within an ascending wedge formation in the 60-min chart.
It remains several levels above the 100-hour and the 200-hour SMA lines. The latest pullback pushed the US dollar currency index back to the normal trading zone of the 14-hour RSI, off overbought levels.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the US dollar index is trading ahead of a relatively quiet trading period in the US market. However, more activity is expected later in the week after Biden’s inauguration on Wednesday. On Monday was also Martin Luthar King Jr.’s birthday, which means no significant market activity took place.
On Tuesday, traders will be looking forward to the Redbook Index data for the week ending Jan. 15. The 3-month and 6-month auction-rate updates will also be out. This could provide a platform for Tuesday trading in the US session.
Besides a lack of market activity on Monday, traders will be looking at political activities that could affect the performance of the dollar against other currencies. There are fears of potential protests across the 50 states on the day of the inauguration.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the USDX appears to be trading within a gently ascending wedge formation in the 60-min chart. This indicates a significant short-term bullish bias in the market sentiment. The DXY has recently pulled back from overbought levels of the 14-hour RSI back to the normal trading zone.
The bulls will be looking to extend the current short-term bull-run towards 90.50 or higher to 91.21. On the other hand, the bears will target short-term pullback profits at around 90.56 or lower at 90.32.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US dollar currency index appears to be trading within a sharply descending channel formation. This indicates a strong long-term bearish bias in the market sentiment. The DXY has recently bounced back to avoid slipping to oversold levels of the 14-day RSI.
The bears will look to retain long-term control of the USDX by targeting profits at around 89.70 or lower at 88.24. On the other hand, the bulls will target extended rebounds at around 91.72 or higher at 93.21.