U.S. DOLLAR ANALYSIS
- Global factors keeping dollar afloat.
- US retail sales and Fed speak scheduled for today.
- 200-day MA in focus.
DOLLAR INDEX FUNDAMENTAL FACTORS
The US dollar is trading marginally lower this morning but remains elevated as global uncertainties increase the demand for the greenback. Earlier this morning, China’s central bank surprisingly cut interest rates thus highlighting concerns around the economy while the Argentinian peso’s devaluation added more upside for the USD.
Barring external factors, the US will look ahead to retail sales data today that is expected to push higher (see economic calendar below). Should this come to fruition, the dollar could find some bids after which focus will shift to Fed speak for further guidance. From a DXY point of view, its largest constituent (euro) will face the ZEW economic sentiment index release shortly and could provide some short-term volatility for the index.
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Macro Fundamentals
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US ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
Over the next few months, the dollar may remain well supported by investors unless economic conditions in the US start to truly show signs of significant weakness. As it stands, the gradual drop in inflationary pressures may not be enough for the Fed to start cutting rates. The stubborn labor market remains the key data point and will need to decline before we see some dollar weak vulnerability.
TECHNICAL ANALYSIS
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U.S. DOLLAR INDEX (DXY) DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily DXY chart above places the index at a key area of resistance in line with the 200-day moving average (blue). After breaking above trendline resistance (black) markets will be simultaneously monitoring the weekly chart as to whether the weekly candle closes below or above this trendline. Another close below could maintain the long-term downward trend while the opposite is true should prices close above. There is still room on the Relative Strength Index (RSI) for further upside, bringing caution to bears.
Resistance levels:
- 104.00
- 103.38
- 200-day MA
Support levels:
- 102.50
- 50-day MA (yellow)
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