US Dollar Index Weekly Analysis for the 27th March

The US Dollar Index was mixed this week after last week’s FOMC statement. While the initial reaction was dovish, the buck managed to pare its losses only to weaken yet again. As a result, most of the commodity currency managed to gain against the US Dollar. There were also a few economic data released during the week which also disappointed continuing to keep the US dollar under pressure.

From a technical perspective, price action is still trading within the main longer term resistance price zone of 100 – 97.02, with the Dollar Index currently at 97.6 at the time of writing. As long as the price action continues to remain in this zone, the USD is likely to remain choppy staying directionless and consolidation. A break below 97.02 seems the most likely course in order to find support near 94.8 through 94 levels, which happens to be a price level that has acted as support in the past.

 

The 4-hour chart is probably one that offers the clearest clues into the US Dollar price action within the short term. Notice the 97.79 level which happens to be a previous support level. This support level held during the FOMC news release which saw a selloff, resulting in the US Dollar Index leaving a sharp spike towards 94.35 levels. With the price channel set up on the H4 time frame, we notice that price then dipped lower to 96.42 only to bounce back and currently testing the previous support at 97.79.

If this support level now turns to resistance, the US Dollar Index is likely to see more declines in the near time, potentially testing the lows of 96.42.

Alternatively, if price does break out from the price channel, we will most likely see a retest of this support at 97.79 before prices aim for testing the previous highs near 100.2 through 100.06 levels.

To the downside, a break of 96.42 will then target 95.50, which forms the major support level within a larger time frame.

The US Dollar Index is likely to see some risk today in two aspects. Firstly, the US final quarterly GDP is due to be released. Expectations see a rise to 2.4%, up from 2.2% in the previous release. However, the GDP data could not have much impact considering that the data is for the fourth quarter of 2014. Nonetheless, a bullish print could see the US Dollar push higher.

Later in the event, Fed Chair, Janet Yellen is expected to speak which could potentially bring some volatility to the markets. During this week, there were lot of speeches from other FOMC members, but the markets ignored the comments for the most part; however today schedule with Fed Chair is could be an exception.

Since the last week’s FOMC statement, the US Dollar’s weakness saw a mild rally in most of the USD crosses as well as in the commodity markets, which saw Gold and even Crude Oil reach new multi-week highs. While the Dollar Index does seem weaker within the short term, the longer term view of the uptrend remains intact.