US Dollar Index – Weekly Technical Analysis 27th November

Nov 27, 8:11 am

Dollar Index attempts another go at 100

After close to 8 months of consolidation, the US Dollar index is well poised to breakout above the 100 level. Data this week was mostly mixed but positive for the US Dollar. The second estimates of the third quarter US GDP was revised higher to 2.1% from 1.5% as of the initial estimates. The modestly higher third quarter GDP however saw the markets sell off on the US Dollar due to a broad weakness in the GDP sub-components. Durable goods orders were strong according to data released this week. For the most part, prices remain range bound and we expect this to play out into next week’s nonfarm payrolls data which will be the final unemployment report that the Fed will see ahead of its December rate hike decision. Inflation has remained flat but stable making no cause for concern as far as the rate hike speculation goes. With the exception of the November payrolls report, the US Dollar will likely stay flat and we expect to see a breakout above 100 as we get closer to the Fed’s meeting.

US Dollar index – Technical Analysis

The US Dollar Index briefly touched the highs of 100, a psychological level and a proven resistance zone. The brief rally to 100 saw a pullback in the US Dollar this week and with one more trading session to go, a weekly doji or a spinning top at this region could see a potential decline to 98.41 – 97.98 region of short term support. Past price action near the 100 level has shown that with no near support above 98, the US Dollar Index finds it hard to break above this psychological resistance which is further strengthened by the fact that the breakout above 100 could come from a fundamental catalyst such as next month’s Nonfarm payrolls or the Fed’s rate hike.

The weekly chart however establishes the fact that the Dollar Index has scope to establish support at multiple levels, starting with the 98.41 – 97.98 support followed by 97.28 which saw prices breakout strongly.

US Dollar Index – Weekly Chart (27/11)
US Dollar Index – Weekly Chart (27/11)

On the daily chart time frame for the US Dollar Index, prices have pulled back after an initial spike to the median line. However, with support being established at 98.61, the Dollar Index managed to push back higher. The most recent daily chart candlesticks shows exhaustion as price falls short of breaking above the median line. A decline back to 99.28 through 98.61 could potentially stall the declines in the near term, but a test back to the lower median line could be very much a possibility. There is also the main support at 97.28 which remains to be tested in order to establish support on this broken resistance level.

US Dollar Index – Daily Chart, Rising wedge consolidation below 100.27
US Dollar Index – Daily Chart, Rising wedge consolidation below 100.27

Finally, the 4-hour chart time frame shows prices breaking outside of the rising median line after prices failed to break the inner median line after establishing support at 99.50. We can expect to see a pullback towards the recent high following which, prices could possible decline to 98.50 level which, when taken in context with the weekly and daily time frame shows that the US Dollar Index could post a dip to the 98.41 – 97.98 level of short term support but not ruling out a test to 97.28 major support level.

US Dollar Index H4 Chart, Median Line breakout
US Dollar Index H4 Chart, Median Line breakout
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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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