Technical Outlook:
- USD Dollar Index (DXY) rebound seen as corrective so far
- EUR/USD has good support below to watch on weakness
US Dollar Index (DXY) is recovering off the jab to a level below the earlier-month low, that is resulting in catching fresh sellers off guard. At this time the move is considered corrective in nature, but nevertheless does appear to have some more upside before the rebound runs its course. Watch the May channel line, 2011 trend-line, and swing levels around 93.90 as a spot where the DXY could turn back lower from. This may make for an attractive risk/reward short for would-be shorts. A breakout above that point would indicate a larger reversal is underway. For now, waiting to see how resistance is handled, but a good chance we find that out in the days ahead.
DXY Daily Chart (resistance to watch on move higher)
U.S. Dollar Currency Index (DXY) Chart by TradingView
If the DXY is in recovery mode, then EUR/USD is sinking. The fake-out breakout is at the least resulting in shaking out some weak hands before trading higher. A larger reversal may be underway, but first will look to support just a few pips under 11700, where we have the bottom of the recent range and the lower parallel of the May to current channel. This could be a good risk/reward spot for those looking to bet on additional euro strength.
EUR/USD 4-hr Chart (watch pullback to support)
For all the charts we looked at, check out the video above…
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
