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James Hyerczyk
US Dollar Index

The U.S. Dollar closed lower against a basket of major currencies on Friday, testing its lowest level since March 16 in the process. The greenback was under pressure all week, but uncertainty ahead of President Trump’s late afternoon press conference led to a short-covering rally early in the session on Friday. After Trump’s press conference the greenback edged lower into the close.

On Friday, June U.S. Dollar Index futures settled at 93.341, down 0.031 or -0.03%. The index settled lower for the week and month, falling 1.55% and 0.69% respectively.

Last week’s stock market rally and reaction to what President Trump didn’t say on Friday suggests the U.S. Dollar is losing its appeal as a safe-haven asset.

In the U.S. last week, the benchmark cash S&P 500 Index finished 3.01% higher. Meanwhile, in his highly-anticipated news conference, President Trump signaled no changes to the trade deal with China despite rising tensions. However, he did announce the U.S. would take action to eliminate special treatment towards Hong Kong.

As far as the components of the dollar index, the Euro extended its gains, testing two-month highs, on Friday. The single currency was supported most of the week after the European Commission’s stimulus plan was announced.

The British Pound edged higher ahead of a new round of Brexit talks next week. Brexit talks about a trade deal with the European Union have not gone well, with the clock ticking on a transition period that runs out at the end of the year.

The Canadian Dollar was little changed against its broadly weaker U.S. counterpart on Friday as data showed a deep slump in the domestic economy in the first quarter, with the Loonie pulling back from an earlier two-and-a-half month high.

The Japanese Yen gave up all of its earlier gains on Friday after a late session stock market surge made the U.S. Dollar a more attractive investment.

Daily June U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Friday’s low at 97.935 will signal a resumption of the downtrend. A move through 100.605 will change the main trend to up.

The minor trend is also down. Taking out 99.995 will change the minor trend to up and shift momentum to the upside.

The main range is 94.530 to 103.960. Its retracement zone at 99.245 to 98.130 is controlling the longer-term direction of the index. On Friday, the selling pressure was strong enough to pierce the lower or Fibonacci level.

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Short-Term Forecast

Based on Friday’s price action and a longer-term viewpoint, the direction of the June U.S. Dollar Index is likely to be determined by trader reaction to the major retracement zone at 99.245 to 98.130.

With all the recent main bottoms taken out, the Fib level at 98.130 becomes the key level to watch.

The daily chart indicates there is plenty of room to the downside under 98.130 with the next major target the March 9 bottom at 94.530.

Holding above 98.130 will indicate sellers are lightening up or buyers are returning, but we’re not likely to see a near-term rally develop unless buyers can sustain a rally over the 50% level at 99.245.

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

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