After two weeks of dollar weakness, the currency market is experiencing a pullback. The Dollar Index DXY is rising after briefly dipping below the 100 level. This level had already attracted buyers on the dips of 18 September but failed to reverse the trend.
Since the beginning of the year, a move towards or through this level has sparked interest in the dollar and triggered several 4-7% rallies. Obviously, the Bulls are hoping for a new reversal from the support line that has been in place for almost two years.
In addition, a price and RSI divergence is forming on the daily timeframe, with lower price lows corresponding to higher index lows. A bounce or reversal often follows this.
However, we see limited room for a bounce in the dollar, the value is being eroded by monetary easing, as markets are pricing in almost a 60% chance of another 50-point decline in early November after a double dip in September.
At a higher level—on a weekly basis—the index has fallen below its 200-week moving average. A similar break in the ultra-long-term trend occurred in July 2020 and December 2017. In both cases, it was followed by several consecutive weeks of declines of more than 5%.
The RSI dip into oversold territory on these timeframes was not an early reversal signal. Still, it did trigger a prolonged consolidation - the dollar bulls' last hope for the coming months.
Trade Responsibly. CFDs and Spread Betting are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.37% of retail investor accounts lose money when trading CFDs and Spread Betting with this provider. The Analysts' opinions are for informational purposes only and should not be considered as a recommendation or trading advice.
Recommended Content
Editors’ Picks
EUR/USD treads water above 1.1050 amid cautious markets
EUR/USD is trading with caution above 1.1050 on Wednesday's European morning. The pair remains undermined by sustained US Dollar strength, in the face of the Middle East conflict and pre-ADP data nervousness. Speeches from ECB and Fed policymakers will be also eyed.
GBP/USD stays depressed below 1.3300 on tepid risk sentiment
GBP/USD stays depressed below 1.3300 in European trading on Wednesday. The cautious trading could be attributed to risk aversion due to the rising geopolitical tensions in the Middle East, which underpins the safe-haven US Dollar at the expense of the risk-sensitive Pound Sterling.
Gold pulls back toward $2,650, focus shifts to US data, Fedspeak
Gold pulls back after Tuesday’s rally on increased geopolitical risk stemming from Iran’s escalation in the Middle East. The macro backdrop remains positive, however, with falling interest rates globally making Gold shine. Eyes turn to US ADP data, Fedspeak.
XRP open interest skyrockets as Ripple tests its stablecoin RLUSD
Ripple has generated interest among derivatives traders as the payment remittance firm tests its stablecoin Ripple USD. Ripple announced that the asset is awaiting regulatory approval and is geared toward institutions, not individuals.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.