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James Hyerczyk
US Dollar Index

The U.S. Dollar closed higher against a basket of major currencies after posting a dramatic mid-session reversal to the upside. The move erased all of the earlier losses. Nonetheless, the market was still on pace for its biggest monthly drop in a decade as concerns that an increase in U.S. coronavirus cases will slow the rebound in the economic recovery.

On Friday, September U.S. Dollar Index futures settled at 93.321, up 0.312 or +0.34%. This was up from a low of 92.510.

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The strong rebound was partly fueled by data on Friday that showed U.S. inflation-adjusted consumer spending has pulled out of April’s deep hole but remains below its pre-pandemic level. End of the month position-squaring and profit-taking may have been other reasons for the higher close.

The heavily weighted Euro settled down -0.64%. The Japanese Yen lost 0.19% and the British Pound was off 0.13%. The commodity-linked Canadian Dollar gained 0.01% and the safe-haven Swiss Franc fell 0.52% against the U.S. Dollar.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 92.510 will signal a resumption of the downtrend.

A trade through 97.810 will change the main trend to up. This is highly unlikely over the near-term, but Friday’s closing price reversal bottom suggests the buying may be greater than the selling at current price levels.

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

The minor range is 96.380 to 92.510. Its retracement zone at 94.445 to 94.900 is the first upside target.

The main range is 97.810 to 92.510. Its retracement zone at 95.160 to 95.785 is the second upside target.


Short-Term Outlook

The closing price reversal bottom only stops the selling; it’s the follow-through to the upside to the upside through the session’s high that confirms the potentially bullish chart pattern. The market hasn’t crossed the previous day’s high since July 16 so taking out 93.525 could develop into something significant.

Typically, a confirmed closing price reversal bottom triggers the start of a 2 to 3 day counter-trend rally often combined with a 50% retracement of the last break. This would make 94.445 and 95.160 potential upside targets.

The closing price reversal bottom will be negated on a trade through 92.510. This will also signal a resumption of the downtrend.

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

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