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USD Price Outlook: US Dollar Rebound Attempt in Focus

USD Price Outlook: US Dollar Rebound Attempt in Focus

Rich Dvorak, Analyst

US DOLLAR OUTLOOK: USD PRICE ACTION PERKING UP AS MARKET SENTIMENT SOFTENS

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US Dollar bulls made an effort to steer USD price action back higher on Tuesday. This rebound attempt gained more traction than the previous session, which saw the US Dollar flop intraday as stimulus deal optimism fueled bears. The broad-based DXY Index is pacing a gain of 0.66% on the day and looks set to close above its 8-day simple moving average.

Resurfacing demand for safe-haven currencies stands out as a primary driver of US Dollar strength amid renewed coronavirus concerns. The US Dollar extended its push to probe session highs on the back of disappointing consumer confidence data. Also, in the wake of growing no-deal Brexit speculation, steep declines notched by EUR/USD and GBP/USD price action likely exacerbated the bid beneath the Greenback.

EUR/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 3% -13% -6%
Weekly 20% -24% -7%
What does it mean for price action?
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DXY - US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (24 AUG TO 22 DEC 2020)

DXY Index Price Chart US Dollar Technical Forecast

Chart by @RichDvorakFX created using TradingView

The US Dollar Index reclaiming its short-term simple moving average stands out as an encouraging technical development for bulls and increases the likelihood of a broader reversal. A sustained rebound attempt is also hinted at by the relative strength index moving out of ‘oversold’ territory coupled with bullish divergence on the MACD indicator.

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This brings to focus month-to-date highs around the 91.10-price level as an area of technical resistance that could thwart potential advances before a test of support-turned-resistance near the 92.00-handle comes into consideration. On the flip side, a resumption of selling pressure might steer the DXY Index back toward the 89.80-price level underpinned by month-to-date lows and its lower Bollinger Band.

USD PRICE OUTLOOK - US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)

USD Price Chart Outlook US Dollar Implied Volatility Trading Ranges

Learn More - What is Implied Volatility & Why Should Traders Care?

The Pound-Dollar is still expected to be the most active currency pair judging by overnight implied volatility readings. GBP/USD overnight implied volatility of 21.3% compares to its 20-day average reading of 15.2% and ranks in the top 96th percentile of measurements taken over the last 12-months. This comes as little surprise, however, with UK-EU trade deal negotiators entering the 11th hour of talks before the 31 December Brexit deadline.

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-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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