James Hyerczyk
Add to Bookmarks
US Economy

The U.S. Dollar is inching lower against a basket of major currencies on Thursday. Most of the early pressure is coming from a slightly stronger Euro. The rest of the selling is being generated by a stronger Canadian Dollar, British Pound, Japanese Yen and Swiss Franc.

The market moving event on Thursday is likely to be the European Central Bank’s (ECB) interest rate and monetary policy decisions. The ECB is expected to leave rates unchanged so if there is going to be a surprise, it will be in the statement and from comments by ECB President Mario Draghi.

Know where the Market is headed? Take advantage now with 

75% of retail CFD investors lose money

The ECB will try to give the ailing Euro Zone a boost and may even set the stage for more action later this year as an escalating global trade war unravels the benefits of years of monetary stimulus. Draghi is expected to maintain guidance about the possibility of more stimulus.

The dollar’s weakness against the Canadian Dollar and British Pound is primarily related to increased bets on a Fed rate cut sooner than previously expected. Speculators have been betting heavily on a rate cut for weeks in reaction to a plunge in U.S. Treasury yields. Their bets paid off earlier this week when Fed Chair Jerome Powell strongly hinted the Fed would be willing to alter policy and cut rates in order to repair the battered economy.

The safe-haven Japanese Yen and Swiss Franc are trading mixed on Thursday. Helping to support the dollar is increased demand for risky assets. Pressuring the dollar against the Yen and Franc are another dip in Treasury yields.

At 10:97 GMT, June U.S. Dollar Index futures are trading 97.205, down 0.046 or -0.05%.

Daily June U.S. Dollar Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift to the upside following the formation of the potentially bullish closing price reversal bottom on Wednesday. This move mirrored the potentially bearish closing price reversal top in the Euro.

A trade through 97.305 will confirm the chart pattern. This could lead to a 2 to 3 day counter-trend rally or a 50% to 61.8% retracement of the last downswing.

A move through 96.655 will negate the chart pattern and signal a resumption of the downtrend.

The main range is 95.17 to 98.260. Its retracement zone at 96.715 to 96.350 is the primary downside target. This zone stopped the selling at 96.655 on Wednesday.

The new short-term range is 98.260 to 96.655. If the closing price reversal bottom is confirmed then its retracement zone at 97.46 to 97.65 will become the primary upside target.


Daily Technical Analysis

Based on the early price action, the direction of the June U.S. Dollar Index on Thursday is likely to be determined by trader reaction to yesterday’s high at 97.305.

Bullish Scenario

Taking out 90.305 will confirm the closing price reversal bottom. A sustained move over this level will indicate the buying is getting stronger. This could trigger a rally into the 50% level at 97.460. Since the main trend is down, look for sellers on the first test of this level. Taking it out could trigger an acceleration into a resistance cluster at 97.635 to 97.650.

Bearish Scenario

The inability to take out 97.305 will signal the presence of sellers. Crossing to the weak side of the downtrending Gann angle at 97.01 will indicate the selling is getting stronger with the next target an uptrending Gann angle at 96.890. If this fails then look for a retest of 96.715 and 96.655.

A failure at 96.655 could trigger an acceleration into the major Fibonacci level at 96.350.


Essentially, the direction of the Euro on Thursday will determine the direction of the June U.S. Dollar Index today and the ECB decision is likely to trigger a volatile response in the single currency. Dovish comments should send the Euro lower and the index higher.

The question for investors is whether ECB President Draghi will match Fed Chair Powell’s dovish tone from earlier in the week, or put up a less-dovish or more-hawkish front.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker