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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading lower against a basket of major currencies at the mid-session on Wednesday amid progress in developing vaccines for the novel coronavirus and a historic stimulus deal in Europe when drove the heavily-weighted Euro to its highest level since January 2019. The news reduced the greenback’s safe-haven appeal, pushing investors back into emerging market plays.

At 16:23 GMT, September U.S. Dollar Index futures are trading 94.845, down 0.220 or -0.23%.

The greenback clawed back earlier losses and inched higher after China said the United States had abruptly told it to close its consulate in the city of Houston, stoking more tension between the countries.

The dollar is also being pressured by concerns about a possible delay to U.S. fiscal stimulus, as the Republicans and Democrats struggle to reach a consensus on the next round of economic stimulus measures.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed when sellers took out yesterday’s low earlier in the session.

The main trend changes to up on a move through 97.810. This is highly unlikely, however, due to the prolonged move down in terms of price and time, the market is ripe for a potentially bullish closing price reversal bottom.

The minor trend is also down. A move through 96.380 changes the minor trend to up. This will shift momentum to the upside.

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Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 94.845, the direction of the September U.S. Dollar Index into the close is likely to be determined by trader reaction to Tuesday’s close at 95.060.

Bearish Scenario

A sustained move under 95.060 will indicate the presence of sellers. This could drive the index into the March 9 bottom at 94.670. We could see a technical bounce on the first test of this level, but if it fails then look for an acceleration to the downside.

Bullish Scenario

A sustained move over 95.060 will put the index in a position to post a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally. Since the main trend is down, sellers will be waiting to sell normal 50% to 61.8% retracements.

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