With the FOMC in the limelight this week, a technical assessment of the Dollar Index will help highlight the key levels to watch for the week ahead. First and foremost, against a basket of six major currencies, the US dollar’s strength further diminished last week, down -0.5%. This somewhat questions the strength of the current trend on the daily timeframe, northbound since bottoming in mid-April at 100.79. In fact, Thursday, in the shape of a near-full-bodied daily bearish candle, pencilled in a fresh low, penetrating the 103.38 low (2 June) and thus displaying early signs of a bearish trend reversal. Time will tell whether we see continuation selling unfold, given the Relative Strength Index (RSI) ending the week posting a modest rebound from the 50.00 centreline.
In terms of technical structure, two immediate areas jump out this week. To the downside, the 50-day simple moving average can be seen at 102.51, a dynamic value sharing chart space with local support at 102.26. At the same time, any meaningful attempt to explore higher terrain this week will unmask familiar resistance between 105.82 and 105.36, which merges with trendline resistance extended from the high 114.78, the 200-day simple moving average at 105.45 and two Fibonacci retracement ratios (38.2% and 61.8%) at 105.54 and 105.25, respectively.
In terms of technical structure, two immediate areas jump out this week. To the downside, the 50-day simple moving average can be seen at 102.51, a dynamic value sharing chart space with local support at 102.26. At the same time, any meaningful attempt to explore higher terrain this week will unmask familiar resistance between 105.82 and 105.36, which merges with trendline resistance extended from the high 114.78, the 200-day simple moving average at 105.45 and two Fibonacci retracement ratios (38.2% and 61.8%) at 105.54 and 105.25, respectively.