James Hyerczyk
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US Dollar Index

The U.S. Dollar plunged to its lowest level against a basket of major currencies since January 13 on Monday. Among the components of the basket driving the greenback lower were the Euro, which is posting a 0.29% gain late in the session. The Japanese Yen is up 0.33% and the British Pound is notching a 0.40% gain.

At 21:24 GMT, March U.S. Dollar Index futures are treading 90.090, down 0.273 or -0.30%.

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The greenback resumed its slide on Monday and reached multi-year low against the British pound and the Australian Dollar as traders focused on the promise of coronavirus vaccinations and the outlooks for economic growth and inflation that could push bond yields higher.

The dollar’s latest retreat comes with spreading belief that the U.S. will go further than necessary to support the economy with government spending and easy money policies and end up with too much inflation and too much additional debt.

In other news, the Euro rose after data on Monday showed German business morale rose more than expected in February due notably to the country’s resilient industrial sector.

Meanwhile, the British Pound hit its highest level since April 2018 as Prime Minister Boris Johnson announced a path out of lockdowns on the U.K.’s relative success providing COVID-19 vaccinations.

On Tuesday, investors will be watching testimony from Federal Reserve Chair Jerome Powell to the Senate Banking Committee. They’ll be looking for any sign that the Fed might become less dovish and more mindful of inflation.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Monday when sellers took out the main bottom at 90.030. A move through 89.890 will reaffirm the downtrend.

The main trend will change to up on a move through 91.605. This is highly unlikely but due to the prolonged move down in terms of price and time, we could start watching for a closing price reversal bottom.

The minor trend is also down. A trade through 91.050 will change the minor trend to down and signal a resumption of the uptrend.

The short-term range is 89.165 to 91.605. The index is currently straddling the lower level of its retracement zone at 90.095. The upper level at 90.385 is potential resistance.


Short-Term Outlook

The short-term direction of the March U.S. Dollar Index is likely to be determined by trader reaction to the Fibonacci level at 90.095.

Bearish Scenario

A sustained move under 90.095 will indicate the presence of sellers. Taking out the next main bottom at 89.890 will reaffirm the downtrend and signal that the selling pressure is getting stronger.

The daily chart indicates there is plenty of room to the downside with 89.165 a potential target. Therefore, we’re going to treat 89.890 as a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 90.100 will signal the presence of buyers. If the short-covering momentum is strong enough then look for the rally to possibly extend into 90.385. Overcoming this level will indicate the buying is getting stronger.

For a look at all of today’s economic events, check out our economic calendar.
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