We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
More View more

DailyFX PLUS Content Now Available Freely to all DailyFX Users

Real Time News
  • Commodities Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Silver: 0.42% Gold: 0.41% Oil - US Crude: -0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/qdRVEtYobI
  • I am genuinely curious how Saudi Arabia got production back up so quickly. Makes it seem like they had massive spare capacity that was idled or they just ran a big garden hose around the portion of the plants that was destroyed...
  • US and Chinese 'deputies' are due to restart negotiations today. Meanwhile, the cumulative pain of tariffs continues to show through. FedEx earnings are an example. Here is $FDX overlaid with the Yuan-Dollar exchange rate (green) https://t.co/WZtuuUkhE7
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.67%, while traders in France 40 are at opposite extremes with 85.67%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/T417OE2Mmy
  • $NZDUSD: A close below the low end of the zone could send NZD/USD towards 0.6136. Get your #technicalanalysis from @malkudsi here: https://t.co/i2YMDFJkRp https://t.co/TuvWNJZtgg
  • Indices Update: As of 18:00, these are your best and worst performers based on the London trading schedule: US 500: 0.22% Wall Street: 0.13% Germany 30: -0.04% France 40: -0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/aDo9IwMads
  • Re-upping this. https://t.co/SUv8Lzbhxu
  • $USDCAD: The broader focus remains on a break of the 1.3155- 1.3355 zone for guidance on our near-term directional bias. Get your technical analysis from @MBForex here: https://t.co/q1UJdW49AW https://t.co/OR0Gl1YPIn
  • Precious Metals Update: #Gold 1,499.19 (+0.35%), #Aluminum 1,785.50 (-0.36%), and #Copper 5,814.00 (-0.12%). [delayed]
  • RT @BobOnMarkets: In other words, juts like back before forward guidance led markets to price out risk premiums and over-inflate asset pric…
‎US Dollar Index Forecast: DXY Jumps As FOMC Allows Inflation Breakout

‎US Dollar Index Forecast: DXY Jumps As FOMC Allows Inflation Breakout

2018-05-02 19:34:00
Tyler Yell, CMT, Currency Strategist

US Dollar Index (DXY) Talking Points:

  • US Dollar Index Technical Analysis: Pullback appears likely, but support anticipated at 91.11-90.56 zone. Such a pullback could bring a trader a cleaner place to enter on a market potentially early in its breakout phase or at the beginning of wave three of a five wave bullish sequence
  • The unwind of US Dollar short positions per the CFTC report may mean the upside has room to run and Wednesday’s FOMC statement showed the Federal Reserve is allowing for an overshoot of inflation.
  • Trader Sentiment Highlight from IG UK: jump in XAU/USDbullish bias indirectlyfavors upside. Per Intermarket analysis, Gold tends to move inversely to US Dollar Index, and the bearish bias may mean the US Dollar may move higher yet or that pullbacks may remain shallow.

A boring FOMC statement may have been the best thing US Dollar bulls could have experienced on Wednesday. Despite a ripping commodities market that could easily continue to take inflation expectations higher, the Fed opted to remove the statement, “But the Committee is monitoring inflation developments closely.”

On initial release of the statement, the Dollar dropped, but this should not be expected to be the start of a new trend as global data as evidenced by China and Europe at the beginning of the year continue to disappoint.

One key way to see the divergence is via the Citi Economic Surprise Index (CESI) of the US Economy and the global economy as a whole. The decoupling of the stable, though less robust US Economy while the global economy may provide another boon for the US Dollar to strengthen.

US Economy Isn't Catching The World's Economic Cold

‎US Dollar Index Forecast: DXY Jumps As FOMC Allows Inflation Breakout

Data source: Citi, Bloomberg

If the US CESI starts to show robust moves higher as the global economy economic disappoints continue, then the fundamental argument for capital flows into the US that strengthens the US Dollar may also continue and take the US Dollar higher yet.

Technical Focus on US Dollar Index: No Ordinary Correction

‎US Dollar Index Forecast: DXY Jumps As FOMC Allows Inflation Breakout

Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT

Unlock our Q2 forecast to learn what will drive trends for the US Dollar through 2018!

The US Dollar Index is pushing above the 200-DMA at 91.98, and on Wednesday traded at a new 2018 high. The breakout higher could cause a further unwind in the massive US Dollar short trade that saw institutions with the largest aggregate position betting on USD weakness in nearly six years per the CFTC.

Given the strength of the move higher, traders would likely do best to focus on likely support points on a probable retracement level. With RSI(5) showing the highest reading since early 2016, a pull-back should not scare-off longer-term US Dollar bulls.

Utilizing Ichimoku, a likely support point would be the 9- & 26-day midpoint or Tenkan-sen and Kijun-sen that are at 91.11-90.56 respectively. Only a move lower would open up the probability that the retracement went too far too fast, and money is being taken off the table by institutions.

Not familiar with Ichimoku? You’re not alone and in luck. I created a free guide for you here

For now, it looks like the global cost of a US Dollar is going to remain on a steep slope higher.

Recommended Reading: 4 Effective Trading Indicators Every Trader Should Know

Insight from IG Client Positioning: Traders are further net-long Gold, which holds an inverse relationship to the direction of the US Dollar

‎US Dollar Index Forecast: DXY Jumps As FOMC Allows Inflation Breakout

XAU/USD sentiment is analyzed for insight since XAU/USD is inversely correlated to DXY.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Spot Gold-bearish contrarian trading bias (emphasis mine.)

New to FX trading? No worries, we created this guide just for you.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

Join Tyler’s distribution list.

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


News & Analysis at your fingertips.