US Dollar Price on the Brink of Support Break: DXY, Euro Charts
USD Technical Highlights:
- US Dollar Index (DXY) flirting with major support break
- Breakout of wedge pattern could soon be in play
- Euro will be the primary driver here given its weighting
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US Dollar Index (DXY) flirting with major support break
A couple of weeks back the US Dollar Index (DXY) bounced off confluent support arriving by way of the trend-line (underside of longer-term wedge) and the 200-day. The bounce looked sustainable up to at least the old highs in the low-98s, but since the Fed meeting the other day we’ve seen aggressive selling that has support just about broken, again.
‘Teetering’ on support is how I would describe this. Looks like it is about to break and in fact is sneaking every so slightly under the trend-line already, but still price hasn’t fully cleared all levels. To get a confirmed break a move through 96.46 on a closing daily basis is needed, weekly basis even better.
A confirmed break will have a wedge formation in play as well and this could lead to the DXY testing downside levels in aggressive fashion in the weeks ahead. It would be a welcomed event as pent up pressure has led to increasingly choppy trading conditions. Something looks set to give at some point soon…
However, a failure to sustain under support may lead to a rally, so the key here is to wait for a confirmed break. A hold of support won’t turn the Dollar bullish, but it does at least keep it neutral with shorts still lacking the proper set of conditions needed to get aggressive. Would-be longs can continue to use support as a line-in-the-sand for however long it lasts.
US Dollar Index (DXY) Weekly Chart (wedge)
US Dollar Index (DXY) Daily Chart (teetering on support)
Euro will be the primary driver here given its weighting
The Euro being 57% of the DXY index means it will be the primary driver. It, like the Dollar Index, has a similar chart pattern, but pointing in the opposite direction. A break above confluent resistance (close above 11352) should have EURUSD running higher. But resistance is resistance until it’s not, so still a little work to do.
EURUSD Weekly Chart (falling wedge)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.