The US Dollar Index (DXY) on Thursday plunged to trade below the 97.40 level for the first time in over four weeks after stock prices plunged again. The USDX continues to trade within a highly volatile sideways channel, which recently pushed it towards oversold levels of the RSI indicator in the 60-min chart.
The Dollar Index has been restricted to within the 97.40-98.40 range for the most part of the last five weeks and on Thursday found support again just around the 97.40 level.
The US Dollar Index Fundamentals Overview
From a fundamental perspective, the US Dollar Index measures the performance of the US Dollar against a weighted basket of six currencies. The recent pullback indicates that most of its rivals are strengthening at a higher rate than the dollar. This could be partly due to recent comments by President Trump that seemed to suggest that trade talks with China could drag to after the general elections next year.
In terms of economic data, the dollar index is trading at the back of another disappointing series of key performance data. On Monday, the US ISM Manufacturing PMI for November missed the expectation of 49.2 with 48.1 while on Wednesday, the ISM non-Manufacturing PMI also came short of the expectation of 54.5 with 53.9. This sent stocks plunging and along with them the dollar index.
Looking forward, traders will be anxiously waiting to see the non-farm payroll numbers tomorrow. Current expectations have a Jobs estimate of 180k while the (YoY) average hourly wage growth is estimated at 3%, same as the previous month. On the other hand, the Michigan Consumer Sentiment Index is expected to edge lower to 96.5 down from 96.8 basis points in the previous month.
The US Dollar Index Technical Analysis (the 60-min Chart)
Technically, the USDX appears to be trading in a highly volatile movement in the 60-min chart. This creates some interesting trading opportunities for both the bulls and the bears.
Going into Friday, the bulls will be targeting short-term profits at around 97.61 while the bears will hope that the DXY can breach the trendline support and head towards 97.16.
The US Dollar Index Technical Analysis (the Daily Chart)
In the daily chart, the US dollar index appears to be trading in an ascending channel, which indicates a long-term bullish bias in the market sentiment. However, the USDX appears to have recently remained depressed closer to the trendline support, which could be indicative of a potential trend reversal.
Therefore, the bears will be targeting long-term profits at around 96.70, 96.03 or lower at 95.22. On the other hand, the bulls will hope for an immediate rebound towards 98.17, 99.07 or higher at 99.73.