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James Hyerczyk
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Dollar

The U.S. Dollar rose against a basket of major currencies on Wednesday after a sell-off in the U.S. stock market prompted investors to seek shelter in the safe-haven currency. Capping gains may have been positive vaccine news and expectations of more U.S. fiscal stimulus next year.

At 19:15 GMT, December U.S. Dollar Index futures are trading 91.145, up 0.177 or +0.19%.

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With U.S. coronavirus cases exceeding 15 million on Tuesday, regulators moved a step closer to approving a COVID-19 vaccine, while Britain started inoculating people on Tuesday.

Investors are also tracking negotiations over U.S. coronavirus aid, with the Trump administration proposing a $916 billion package on Tuesday after congressional Democrats rejected a slimmer plan.

A plunge in the Euro also helped drive the index higher since it represents 57% of the index. Pressuring the Euro is speculation that the European Central Bank is set to expand its massive stimulus program Thursday as the continent deal with a second wave of the coronavirus pandemic and associated lockdowns, according to Reuters.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 93.190 will change the main trend to up. This is not likely to happen, but there is room for a normal retracement of its recent break. Taking out 90.470 will signal a resumption of the uptrend.

The minor trend is also down. A trade through 92.040 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is 92.040 to 90.470. Its 50% level at 91.255 is the first upside target. This level stopped the rally at 91.240 on Monday.

The main resistance is a long-term Fibonacci level at 91.815.

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Short-Term Outlook

After consolidating the last five sessions, the December U.S. Dollar Index appears to be ready to breakout over the minor 50% level at 91.255. This is a potential trigger point for an acceleration to the upside with 91.815 a potential upside target.

A failure to overtake 91.255 with conviction will indicate the presence of sellers. This could lead to a retest of 90.470, followed by the July 9, 2018 main bottom at 90.460.

Side Notes

Look for heightened volatility on Thursday with the release of the ECB interest rate and monetary policy decisions. Traders expect policymakers to announce new stimulus. Although this has been priced into the market, we could still see a break in the Euro, which would help drive the index higher.

Furthermore, ECB officials may try to talk down the Euro, which could put added pressure on the single-currency, and help drive the greenback higher.

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