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James Hyerczyk

The U.S. Dollar is in a position to close lower against a basket of major currencies on Friday as traders reacted to the possibility of increased monetary stimulus from the U.S. Federal Reserve, while ignoring the steady rise in demand for U.S. equities and the safe-haven U.S. Treasury Notes.

At 21:45 GMT, December U.S. Dollar Index futures are trading 92.720, down 0.236 or -0.25%.

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The price action on Friday was a bit confusing because on Monday, the dollar rallies as stocks rose and interest rates dropped. Today’s move was the exact opposite which indicates it had nothing to do with the possibility of a vaccine to fight the coronavirus pandemic.

A sharp rise in the Japanese Yen followed by strong gains in the British Pound and Euro contributed to the weakness in the greenback as well as weaker-than-expected U.S. consumer confidence data. Preliminary University of Michigan Consumer Sentiment came in at 77.0. Traders were looking for a reading of 82.1. Last month’s number was revised higher.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since Monday’s closing price reversal bottom. A trade through 92.120 will negate the chart pattern and signal a resumption of the downtrend. The main trend will change to up on a move through 94.330.

The main range is 94.330 to 92.120. Its retracement zone at 93.225 to 93.490 is potential resistance.

The minor range is 92.120 to 93.190. Its 50% level at 92.655 is potential support and a trigger point for an acceleration to the downside.

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Short-Term Outlook

Trader reaction to the pivot at 92.655 is likely to set the tone next week.

Holding above 92.655 will indicate the presence of counter-trend buyers. If this creates enough upside momentum then look for the rally to possibly extend into the retracement zone at 93.225 to 93.490. Since the main trend is down, sellers are likely to come in on a test of this zone.

The bias is likely to remain to the downside as long as 93.490 remains resistance. Taking it out could trigger an acceleration to the upside.

A trade through 92.655 will signal the presence of sellers. This could trigger an acceleration to the downside into 92.120.

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