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US Dollar Technical Forecast: Can Greenback Gains Continue?

US Dollar Technical Forecast: Can Greenback Gains Continue?

2019-09-01 06:00:00
Rich Dvorak, Analyst
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US DOLLAR PRICE WEEKLY TECHNICAL OUTLOOK:

  • The US Dollar Index surged to its highest level since May 2017 as greenback strength dominated currency price action last week
  • The US Dollar looks set to continue its advance and the technical backdrop on spot USDCHF is of particular interest
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USD price action recorded a steady ascent over the last 5 trading days with the DXY US Dollar Index jumping a healthy 1.59%. Last week’s surge in the US Dollar, although impressive, was largely a rebound from sizable downside recorded the preceding week as markets gyrate in response to the latest US-China trade war developments.

US DOLLAR – DXY INDEX PRICE CHART: 15-MINUTE TIME FRAME (AUGUST 23, 2019 TO AUGUST 30, 2019)

DXY Index US Dollar Price Chart Technical Analysis

Chart created by @RichDvorakFX with TradingView

The US Dollar’s steep ascent last week was able to eclipse the August 1 intraday high before tapping out at 99.02. In fact, Friday’s intraday swing to the upside was the highest for the DXY US Dollar Index since May 12, 2017. Turning to the chart below, the DXY Index is now roughly 2-standard deviations away from its 20-day simple moving average and suggests that the US Dollar could be overextended.

US DOLLAR – DXY INDEX PRICE CHART: DAILY TIME FRAME (MARCH 28, 2019 TO AUGUST 31, 2019)

DXY Index US Dollar Price Chart Technical Analysis

Chart created by @RichDvorakFX with TradingView

Yet, the 3-standard deviation Bollinger band implies that there is potential for further upside as prices remain comfortably below top channel line resistance. The relative strength index (RSI) sitting generously above 50 but modestly beneath 70, or “overbought territory,” is also an encouraging sign that upward momentum might continue. If the greenback slips from its fresh high, however, the DXY Index could find technical support around the 98.25-98.50 price zone. This area of confluence also marks the 23.6% Fibonacci retracement level of its June low.

US DOLLAR – DXY INDEX PRICE CHART: WEEKLY TIME FRAME (AUGUST 29, 2016 TO AUGUST 31, 2019)

DXY US Dollar Index Price Chart Technical Analysis

Chart created by @RichDvorakFX with TradingView

Additionally, the US Dollar Index may find technical support at the 98.00 price level as this area of confluence is also highlighted by the 61.8% Fibonacci retracement of its January 2017 swing high. On the weekly chart, we see can see the recent topside breakout in the US Dollar more clearly as the DXY Index surges above this major technical area. That said, the US Dollar is likely to continue marching higher within the confinements of its rising wedge as price action coils further between upward-sloping trendlines extended from the series of higher highs and higher lows since mid-2017.

Looking outside the DXY Index to the major US Dollar currency pairs, the choppy sideways price action being etched out in spot AUDUSD roughly between 0.6700-0.6800 handles is worth mentioning as it could potentially offer attractive range trading opportunities. Elsewhere, spot USDCHF appears to have the cleanest chart setup for possible US Dollar uptrend continuation.

USDCHF PRICE CHART: DAILY TIME FRAME (APRIL 25, 2019 TO AUGUST 31, 2019)

USDCHF Price Chart Technical Analysis Forecast

Spot USDCHF breaking out above its bearish trendline extended from the May 7 and July 31 swing highs was a healthy development for bulls last week and underscores the US Dollar’s latest episode of strength. Also, spot USDCHF surmounting technical resistance posed by the 38.2% Fibonacci retracement of the currency pair’s year-to-date high around the 0.9880 level could provide a positive tailwind and keep spot prices afloat going forward.

Furthermore, the MACD oscillator suggests increasing bullish momentum and the rising RSI remains above 50 but below 70 – both of which are constructive for uptrend continuation. As such, a potential upside target could be set slightly below the 0.9950 price level as spot USDCHF may run into technical resistance here owing to the mid-point retracement of its trading range as well as the 200-day simple moving average. Alternatively, if Friday’s jump higher in USDCHF chalks up to be a “fake-out breakout,” spot prices may edge back lower toward the 0.9800 handle where confluent support is offered by the 23.6% Fib.

-- Written by Rich Dvorak, Junior 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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