US Dollar Index Targets a Retest of Multi-Year Highs After Rebound

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The US Dollar Index (DXY) has continued to recover from its latest pullback after extending current weekly gains to top 98.10. The USDX plunged last week to bottom at around 97.03 after previously trading very close to the key level 99.00. 

The DXY continues to trade within an ascending wedge, which indicates short-term bullish bias in market sentiment. And given the current momentum, it now appears to be on the way to retest its current multi-year highs of about 98.90 set at the start of the month.

The US Dollar Index (DXY) Fundamentals Overview

From a fundamental perspective, the US Dollar Index (DXY) is trading at the back of two contradicting weeks. Last week, the negative market sentiment created by the US Interest rate cut (25 basis points) coupled with President Trump’s announcement of10% trade tariffs on $300 billion worth of Chinese goods triggered the plunge.

This week has been filled with positive economic data including the Consumer Price Index, which beat expectations, Import and Export Index report that beat expectations and Retail Sales data that was also better than expected.

Nonfarm Productivity report and the Initial Jobless Claims data also beat the consensus forecast but Industrial Production and Capacity Utilization missed.

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

Technically, the USDX has recently bounced off the border between the overbought zone and the normal trading zone. This suggests that we could witness a short-term pullback within the current rebound with the DXY looking to continue trading in the ascending wedge.

Therefore, the bears will be looking to pounce for profits at around 98.00 or lower at 97.82 and 97.65. On the other hand, the bulls will be targeting a continuation of the current trend with profit opportunities around 98.20 or higher at 98.41 and 98.61.

The US Dollar Index (DXY) Technical Analysis (the Daily Chart)

In the daily chart, the US Dollar Index (DXY) also appears to be trading within an ascending wedge, which again illustrates a bullish bias. The current trend began following a reversal that took place on June 25, and it appears set to take the DXY further up as it seeks to retest the current multi-year highs.

Therefore, the bulls will be targeting long-term profits at around 98.90 at 0.00% Fib level while the bear will look to pounce by targeting profits at around 97.02 at 61.80% Fib level.

In summary, the USDX appears to experience intense bullish pressure as the impact of last week’s events continues to dissipate paving the way for the continuation of the bullish run as illustrated in the daily chart.

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