US Dollar Price Forecast: DXY Sinks to $98.20 – Is the Greenback’s Safe-Haven Run Over?

Market Overview

US Dollar Weakens as Risk Sentiment Lifts EUR and GBP Outlook

The US Dollar is still taking a hit as improving relations between the US and Iran ease up the demand for safe havens. Optimism about potential talks between the two countries is helping to calm people down a bit about the prospect of oil supply disruptions and those really scary inflation scenarios just isn’t going away – whats calming it down is that oil prices are finally starting to stabilise after recent scary spikes.

As a result we’re seeing a renewed sense of optimism and a ‘risk on’ mood sweep through markets which is making people start to rotate out of the dollar. And at the same time the uncertainty over just how aggressive the Fed might be is still hanging in the air – markets are keeping a very close eye on inflation signals and what the central bank is saying.

On the flip side of this coin – the euro and the British pound are really benefiting from this softer dollar market. As the world feels a bit more confident about investing in risky assets again – and the ECB and Bank of England are both sounding pretty resolute about keeping a firm rein on inflation – then these two currencies are doing a lot better.

Of course, energy prices are still a major worry – especially for Europe and the UK – but at least oil prices arent wildly swinging around at the moment and that at least provides some near term comfort.

Overall, whats driving currency markets at the moment is a mix of geopolitics, and the un-finalised view on what the central bank is going to do – and the outlook for inflation.

DXY Slips Below Channel Support as Bearish Momentum Builds

The US Dollar Index has broken below its rising channel, sending a clear sign that the trend is shifting short-term. Price is trading around $98.20, with recent price action painting some pretty ugly red bodies and tiny lower wicks – that tells you selling is pretty strong at the moment. And it’s not just that – the break below the 50 EMA and an approach towards the 200 EMA is a pretty clear indication that the bullish momentum is starting to falter.

You’ll want to keep an eye on a couple of key support levels: $98.00 and $97.50. But for now, the real focus is on resistance. That’s now sitting at $98.60-$99.00. The RSI is hovering just above oversold territory, around 35, which could suggest we’re in for some consolidation before we get a proper reversal.

But the thing that really stands out to me is that this breakdown from the channel – unless price can reclaim a bit of that structure pretty quickly, I think we’re looking at further downside.

Trade idea: If you’re looking to trade this, look for a sale below $98.00 and aim for $97.50, but use a stoploss above $98.80.

GBP/USD Rejects Fib Resistance as Momentum Cools

GBP/USD has run into a bit of trouble near the 1.3590-1.3600 Fibonacci resistance zone – and recent candles are showing that sellers are getting a bit of a foothold. Price remains above a nice trendline at 1.3500-1.3510, but we’ll need to keep an eye on that one.

The 50 EMA is acting as a bit of a dynamic support, trending higher and keeping the bulls in the running. And the 200 EMA is still sitting below, reinforcing the idea that we’re in a bit of a broad uptrend. RSI has turned lower from near 70 – that’s telling me the momentum is starting to fade after that recent rally.

If we do end up breaking below that trendline support, we might be looking at a bit of a deeper correction down to 1.3460. But if we can hold above it, we keep the upside potential alive.

Trade idea: If you’re looking to trade this one, look for a buy signal near 1.3510 and aim for 1.3600, but with a stoploss below 1.3460.

EUR/USD Faces Resistance as Uptrend Pauses Near Highs

EUR/USD is having a bit of a tough time pushing through resistance near 1.1800-1.1810. Price is consolidating, but recent candles are showing that traders are getting a bit hesitant after that sharp move higher. The pair is still respecting its trendline nicely, which is currently sitting at 1.1750-1.1760 – that’s our first real support level.

The 50 EMA is looking pretty good for the bulls, sloping upward below price and supporting that overall bullish structure. But the 200 EMA is still a bit of an issue – it’s sitting lower and reinforcing the idea that we’re in a medium-term uptrend. And RSI has started to ease off a bit from overbought levels around 70 – that’s telling me the momentum is starting to cool off, rather than reversal.

If we can get a clean break above that resistance, I think we could see a pretty strong move up towards 1.1860 – but if we don’t, we might be looking at a pullback.

Trade idea: If you do decide to trade this one, look for a buy signal above 1.1810 and aim for 1.1860, but with a stoploss below 1.1750.