US Dollar Index test support following a busy week of data ahead. Next week’s market will be driven by fundamentals mainly FOMC on Wednesday, the BOE and the ECB on Thursday, and the NFP on Friday.
US Dollar Index Fundamental and Technical Rundown
The US Dollar printed a doji on the weekly graph for the second week in a row as it traded flat this week. The following week’s economic schedule is extremely packed with notable events, including the Fed on Wednesday and the BoE and ECB on Thursday, so this standoff is probably not going to hold for very long. In addition, considering the Fed’s attitude on Wednesday, the Friday NFP report may be even more significant than normal for the FOMC, which is watching statistics for signs of a deceleration from the wave of rate hikes that occurred last year.
The initial collapse continuation is still having an impact on the technical position of the US dollar at this moment. Coming into the New Year, the USD had maintained support around 103.45, which must have even caused a small rally during the first week of January. But on Friday of that week when a dismal Services PMI reading stunned investors and sparked an escalation of the USD sell-off, all was undone.
The rise in stocks, which persisted into last week, is the theme’s flip side. There is a natural connection there as well since the Fed may become less aggressive in light of the dismal PMI report. Whether or not this actually happens is still high in the air, so we won’t know for sure till the Fed directly relates to us about it next week. After that, the ECB and BoE will address, each of which will be important for the US Dollar given that the Euro makes up 57.6% as well as the British Pound 11.9% of the DXY quotation, respectively.
US Dollar Index Technical view
Two consecutive dojis have appeared on the US Dollar weekly chart, and before that, there was another stand of support that had persisted for a few weeks towards the year’s close. According to longer-term charts, bulls have started to struggle at lows but haven’t quite been able to seize the initiative.
The US dollar is currently hovering around the range of 102. This is the midway point of the 2021–2022 big move, which also assisted in the preceding week’s development of a doji configuration. All of this points to a weakening downturn that has begun to consolidate around important support lines, enabling the development of a collapsing wedge pattern.
The index is still very much under pressure, despite the bounce, and a sustained breach of the 101.50 level should hasten the decline to, at least initially, the May 2022 low around 101.30 (May 30), before the crucial 100.00 yardstick.
Here on upswing, sporadic advances are still restrained by the 3-month resistance level near 103.15. USD is anticipated to maintain its short-term bearish tendency underneath this barrier. Longer term, the picture for the index is still bleak while it is trading below the 200-day SMA at 106.47.
