US Dollar Index – Weekly Technical Analysis – 31/07

The US economy had a busy week with the FOMC statement and the advance GDP data being released. The Dollar Index was no doubt under pressure as investors geared up for positioning in the near medium term. The July FOMC statement did not offer much but it did signal that the Fed could hike rates in September provided there was some improvement in the US unemployment rate. Because the Fed’s next meeting will be in September, the July and August jobs reports will be very crucial, provided all other things remain the same. As such, the US Dollar Index could be extremely vulnerable to the economic data going forward. In terms of the economic growth, the first estimates of the second quarter saw the US GDP expand at a moderately stronger pace of 2.3% growth. Although it missed estimates, the fact that the economy grew rapidly from the previous weak first quarter was signs enough that the economy could be back on track.

The next week will also likely to keep the momentum alive as the July jobs report will be due which will be the first test for the ‘buck’.

Technically, the US Dollar Index has been consolidating between the highs above 100 and the lows of 94.1 for close to the past five months and in the longer term there is a risk of a decline in order for the US Dollar Index to find support at more appropriate levels near 91.50. The monthly chart below with the Andrews Pitchfork shows how prices failed to rally above 100 being rejected by the median line while we see that the most reasonable support comes in at 91.50 through 88.8.

On the daily charts we can see the support/resistance levels in the short term. Currently, the US Dollar Index is seen to be consolidating near the 97.5 – 97.75 region of support resistance. A break above this support could see the US Dollar Index rally and possibly test the next main resistance near 10 and 99.50. To the downside, the declines are likely to be supported by the short term support level near 95.7 ahead of the next major support at 94 through 93.

On the H4 charts, the US Dollar Index is trading near the previously marked level of resistance at 97.6. Failure to close above this level could be an early signal of a possible short term correction ahead of next week’s important economic events. Support on the H4 chart can be seen at 96.55 which could be tested ahead of next week’s jobs report.