Forex Trading Library

USD Index Trends & USD Technical Outlook

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The US Dollar Index began the week higher again and broke above its 100 barrier, leading to another push higher all the way to 100.60’s earlier this morning.

Such more would ease the chances for our head and shoulder pattern to continue. However, the bearish outlook remains unchanged for the time being as long as the index continues to trade below 102.50’s.

Despite the recent rally since the beginning of the week, this might be another short term retracement to the upside, after the technical indicators were heavily oversold at the end of last week.

Therefore, we suspect that the current rally is likely to be limited before the downside trend resumes.

Fundamental Catalyst

The current rally is supported by some fundamental catalyst, including Monday’s ISM Manufacturing PMI which eased back to 57.2 down from 57.7 as widely expected.

But the positive part was the ISM Manufacturing Prices, which advanced to 70.5 up from 68.0 which is the highest level since 2011.

Moreover, the US Trade Balance deficit came in much better than expected, narrowing to 43.8B down from 48.2B, while the estimates were to decline all the way back to 46.0B only. This is also the lower trading deficit in four months.

The Factory Orders also showed some decent pickup, rising by 1.0% in February compared to 1.5% in January of this year, while the estimates were to rise by 1.0%, posting the third monthly increase in a row.

FOMC Meeting Minutes & US Jobs Report Ahead

In the comings days, there are still many economic figures will be released, which set to have a notable impact on the markets

First, all eyes will be on the FOMC Meeting Minutes later this week. Investors will be looking for more clues regarding the next possible rate hike. However, many of the Federal Reserve members noted that there is no enough data to justify another rate hike in its next meeting.

As for the US Jobs Report, the estimates are looking softer for the month of March compared to the month of February.

The ADP Non-Farm employment change is expected to add 251K new jobs in March after adding more than 258K in February.

The Non-Farm Employment Change is also expected to add around 176K new jobs after the massive 235K last month. Yet, the unemployment rate is expected to remain at 4.7%.

However, what matters the most in these figures is the wages growth. The Average Hourly Earnings is expected to rise by 0.2% last month. Yet, for the past few months, wages has been slowing down, which does not support the idea of a multiple rate hike in the coming meetings.

These are the most important figures that traders need to keep an eye on over the coming days.

 USD Technical Outlook

From a technical analysis point of view, the US Dollar index is now trading within a selling zone according to Fibonacci retracement.

The index retraced by more than 50% from the recent rally as shown on the chart, and now it getting closer to the 61.8%.

In the meantime, there is still a possibility to test the 61.8% which stands at 100.95 before the downside trend resumes. At the same time, there is no guarantee for such test.

Therefore, selling rallies remains the favorable strategy on the short term, with stops above previous top around 102.24

On the downside view, there is still a possibility to retest 98.86 (last week’s low), which would probably grant another downside pressure in the coming days/weeks.

 

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