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US Dollar Technical Analysis: USD Grasps for Higher-Low Support

US Dollar Talking Points:

  • Last week saw a significant move in the US Dollar, with the Greenback jumping by more than 2.5% around the FOMC rate decision.
  • This week sees the US currency remain in the spotlight: Friday brings the release of PCE, the Fed’s preferred inflation gauge. But there’s a plethora of Fed-speak punctuating the calendar ahead of that data release.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
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We’re still working through the aftermath of last week’s FOMC rate decision. While it’s now been almost a week since that event happened, the Greenback put in a very noticeable change-of-pace around the announcement that, as yet, hasn’t reversed. While strength has returned in stocks and even with Treasury yields continuing to drive-lower, the US Dollar remains fairly elevated after last week’s spike.

Yesterday brought a bit of pullback to that theme, and bulls promptly returned upon a test of a key support zone to push prices back up towards the highs. Later today, we’ll get a speech from FOMC Chair, Jerome Powell, and the remainder of the week is punctuated by a chorus of Fed speakers that, likely, will continue to highlight caution around forecasts as there’s still a brutal amount of unknown with regards to inflation and USD price trends.

The key support that’s currently in-play is bound between a couple of Fibonacci levels, plotting at 91.82 and 91.93. The latter of those prices is the 38.2% retracement of the 2021 Q1 spike in the USD, and the former is the 38.2% retracement of the 2011-2017 major move.

To learn more about Fibonacci, check out DailyFX Education

US Dollar Daily Price Chart

US Dollar Daily Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

Taking a shorter-term look at the matter and we can see where this zone came into play overnight to help hold higher-low support. The bounce thus far has been relatively small and buyers haven’t yet been able to punch up to a fresh high, so the current item is to watch whether this support zone can hold the lows ahead of new highs and, if not, the look then moves towards a deeper area of support. Such potential exists in the chasm between 91.32 and 91.38, the former of which is the 50% marker of the same Q1, 2021 bullish spike in the USD. This zone is shown in red on the below four-hour chart.

US Dollar Four-Hour Price Chart

US Dollar Four-Hour Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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