- DXY falls below crucial support that now is expected to be resistance.
- There are a number of fundamental cases for both the upside and downside prospects.
The US dollar lost its footing at a critical support structure according to the DXY chart as bears sabotaged the bullish prospects for the immediate future, from a technical perspective.
Fundamentally, the speculation of a US election outcome of a Blue wave victory has undermined the greenback.
The DXY also edged lower on news indicating a possible resumption of US stimulus talks
However, before the election outcome is known, investors may have to face the risk of a contested result and the impact on global growth of rising COVID-19 cases in Europe and elsewhere, according to analysts at Rabobank:
''We are of the view that risks associated with COVID-19, US-China tensions and the possibility of a contested US election are significant enough for the safe-haven USD to be boosted by short-covering in the coming months.'
''Continued signs of stress between China and the US which could temper the pace of the global recovery and lend support to safe-haven assets. We are forecasting EUR/USD at 1.17 on a 1-month view and see risk of a dip to 1.16 in 3 months,' the analysts at Rabobank added.
DXY market structure
-637380562810546153.png)
The daily chart above shows the price of the DXY now critically trading below the 21-day moving average and the prior support structure that is now expected to resist on a retest.
On a break back above the structure, the bulls will be back in charge with enough fuel to test prior highs and better.
The chart below offers, however, a presumed correction and downside extension.
-637380563231993663.png)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD under pressure below 1.0550 on persistent USD strength
EUR/USD trades deep in the red below 1.0550 on Wednesday. The US Dollar benefits from rising US Treasury bond yields and the cautious market mood, forcing the pair to stay on the back foot. Several Federal Reserve policymakers will be delivering speeches later in the day.
GBP/USD declines toward 1.2650, erases post-CPI gains
GBP/USD loses its traction and retreats toward 1.2650 on Wednesday. Although the stronger-than-expected inflation data from the UK helped Pound Sterling gather strength earlier in the day, the risk-averse market atmosphere caused the pair to reverse its direction.
Gold recovers toward $2,650 as mood sours
Following a pullback during the European trading hours, Gold regains its traction and climbs toward $2,650. Escalating geopolitical tensions help XAU/USD stretch higher, while rising US Treasury bond yields limit the pair's upside.
Why is Bitcoin performing better than Ethereum? ETH lags as BTC smashes new all-time high records
Bitcoin has outperformed Ethereum in the past two years, setting new highs while the top altcoin struggles to catch up with speed. Several experts exclusively revealed to FXStreet that Ethereum needs global recognition, a stronger narrative and increased on-chain activity for the tide to shift in its favor.
Sticky UK services inflation to keep BoE cutting gradually
Services inflation is set to bounce around 5% into the winter, while headline CPI could get close to 3% in January. That reduces the chance of a rate cut in December, but in the spring, we think there is still a good chance the Bank of England will accelerate its easing cycle.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.