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US Dollar (DXY) Outlook Looks Weak But For How Much Longer?

US Dollar (DXY) Outlook Looks Weak But For How Much Longer?

Nick Cawley, Senior Strategist
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US Dollar Price, News and Analysis:

  • US Dollar basket (DXY) remains weak for now.
  • US retail sales on the docket.
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After a fairly benign US inflation reading earlier this week, the next cab off the rank is today’s US retail spending data which is expected to show a robust improvement in the US spending. US retail sales (March) are forecast to show a sharp rise when they are released later today with the month-on-month rate climbing by 5.9% compared to a 3% contraction in February. There are also plenty of outliers with some economists seeing the potential for a double-digit climb in March, driven by the recent stimulus checks and growing economic confidence. A large beat in US retail sales could put upward pressure back on US Treasury yields. The 10-year UST currently trades with a yield of 1.62%, compared to a recent 15-month high of 1.75%.

Traders should also be aware that there are also three Fed speakers today – Bostic, Daly, and Mester – and their commentary needs to be closely followed. For all market-moving economic data and events, see the DailyFX Calendar.

The US dollar basket (DXY) is nearing recent lows and maybe about to form the right shoulder of a head and shoulders pattern that started in early March. While it is still early days, should the neckline around the 91.30/40 area hold, the greenback would likely retrace back to the 92.50 level before falling lower. The recent candlesticks however remain bearish with a short-term series of lower highs and lower lows dominant.

The Head and Shoulders Pattern: A Trader’s Guide

The greenback is also looking oversold at the moment, using the CCI indicator, and while it is early days, the 50-day sma is moving up towards the 200-day sma, suggesting a bullish golden formation is being made. Again, this is early days for the formation but one that needs to be watched.

US Dollar Basket (DXY) Daily Price Chart (September 2020 – April 15, 2021)

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What is your view on the US Dollar– bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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