The US Dollar Index (DXY) bounced off weekly lows of about 98.15 on Friday to top 98.50 as it continued to trade in a consolidative wedge. The bulls and the bears continue to battle for control in the short-term but so far none appears to be edging out the other with a telling breakout the most likely signal for a winner.
Nonetheless, the downside remains limited to around the 98.00 level while the limit for upside potential can be found at 98.80 in the short-term.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the USDX is trading at the back of a major week in the US financial markets. On Wednesday, the Federal Reserve cut the Funds rate by a further 25 basis point to bring it down to 2.00%. This is the second rate cut this year, but there were no signals offered that would indicate the possibility of more rate cuts before the end of the year.
And on Thursday, the US continuing jobless claims for the week ending Sep. 6, beat expectations of 1.672M with 1.661M down from 1.674M in the previous period. The initial jobless claims also impressed despite increasing to 208k up from 206k in the previous period by beating the expectations of 213k for the week ending Sep 13.
On Tuesday, the US industrial production had beat expectations of 0.2% change with 0.6% change while Capacity Utilization outperformed the projected figure of 77.6% with 77.9%. Housing Starts change for August came in at 12.3% versus an expectation of 4.5%.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the bulls appear to be winning the battle today with the USDX approaching overbought levels in the Relative Strength Index Indicator. The Dollar Index recently bounced off the support trendline and now appears to be challenging the resistance trendline up top.
This creates multiple trading opportunities for both the bulls and the bears. The bulls will be targeting profits at around 98.63 and 98.81 while the bears will look to pounce at around 98.40, 98.32 and 98.15.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US Dollar Index continues to trade in an ascending channel and this implies that in the long-term, the bulls retain control. The USDX is currently positioned at the center of the RSI indicator on the daily chart, which suggests that the current bull-run could continue through next week.
Therefore, the bulls will be targeting long-term profits at around 99.89 while the bears will look to pounce by targeting profits at around 96.41 in case of a major reversal in the current trend.
In summary, the USDX appears to be trading under considerable bullish pressure in the long-term, but in the short-term, the battle still rages on with no clear winner as of yet.