USD Technical Analysis: DXY Bounce May be Short-lived, Euro Testing Support
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US Dollar Technical Outlook:
The US Dollar Index (DXY) is catching a bid today as the coronavirus rears its ugly head and pushes global stock markets lower and U.S. index futures down with them. Oil and other risk sensitive assets are reacting as well. But will it last?
We have seen coronavirus headlines of varying levels of seriousness over the months impact markets in both a positive and negative way, but the negative headlines have typically lead to more knee-jerk type reactions. This could once again be the case.
Looking at the DXY from a pure technical standpoint, the trend is strongly lower and with it still having room to go before it trades to the next big level of support (Feb 2018 low at 88.25), today’s bounce may turn out to be an opportunity for sellers.
The Euro, which accounts for 57% of the DXY’s weighting, has a strong uptrend going for it, as well as trend-line support from November. EUR/USD having a good trend and support at its feet makes this an interesting spot for would-be longs.
The trend-line can be used as a guide for determining risk. If price stays above then the outlook remains solidly constructive with a chance to continue a run to the 2018 high over 12500. On the flip-side, a break below the trend-line, while not necessarily enough to reverse the trend all together, will be enough to at least turn the outlook neutral.
All-in-all, the scary headlines from over the weekend are causing markets, including the DXY/Euro, to react against their trends and may offer pullback opportunity for traders.
US Dollar Index (DXY) Daily Chart (trending lower, yet to hit support)
U.S. Dollar Currency Index (DXY) Charts by TradingView
EUR/USD 4-hr Chart (trend-line support)
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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.