The U.S. Dollar Index has been drifting higher for about two months, but now the move may have run its course.
DXY peaked at 93.44 in March. It got within 0.25 of that level on Wednesday but reversed and dipped below Tuesday’s low. In other words, we have a bearish outside candle near resistance. The previous candle also had something of a shooting star. All of those are potential signs of a top.
Next, MACD has been negative and showing bearish divergence for almost a week. Stochastics are also in an overbought condition.
The greenback’s bounce in recent months isn’t a huge surprise because its low around 89.50 has long-term significance from 2009. Breaking that level is a potentially big deal that could trigger a deeper selloff, so it may require a few probes before giving way:
The macro backdrop could also favor dollar weakness because the U.S. economic data is slowing. Initial jobless claims just rose (unexpectedly) to their highest level in two months and Jerome Powell increased his dovishness in Congressional testimony last week.
At this point, it isn't clear whether DXY is in a real downtrend -- or simply rangebound between 89.50 and 93.44. But from here, odds may favor at least a retest back toward the bottom of the channel.
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DXY peaked at 93.44 in March. It got within 0.25 of that level on Wednesday but reversed and dipped below Tuesday’s low. In other words, we have a bearish outside candle near resistance. The previous candle also had something of a shooting star. All of those are potential signs of a top.
Next, MACD has been negative and showing bearish divergence for almost a week. Stochastics are also in an overbought condition.
The greenback’s bounce in recent months isn’t a huge surprise because its low around 89.50 has long-term significance from 2009. Breaking that level is a potentially big deal that could trigger a deeper selloff, so it may require a few probes before giving way:
The macro backdrop could also favor dollar weakness because the U.S. economic data is slowing. Initial jobless claims just rose (unexpectedly) to their highest level in two months and Jerome Powell increased his dovishness in Congressional testimony last week.
At this point, it isn't clear whether DXY is in a real downtrend -- or simply rangebound between 89.50 and 93.44. But from here, odds may favor at least a retest back toward the bottom of the channel.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
