US dollar index trading towards support, watch long-term channel
The US dollar is trading towards significant support, that keeps the outlook neutral at worst if it holds, but if it breaks could spark selling pressure.
US dollar technical outlook
- US dollar index (DXY) is falling towards significant support
- Channel keeps outlook neutral to bullish, breakdown would be significant
DXY is falling towards significant support
The DXY is heading lower towards a significant threshold of support. The index has been grinding its way higher since the middle of 2018, forming a channel that is once again on the verge of getting tested.
As a result of the tight trading conditions we have seen volatility drop sharply, but that isn’t likely to last much longer as the yearly range-to-date for the DXY is the smallest, if it holds, since 1976. This extreme appears to be unsustainable as it was back then when the following year saw an expansion in volatility.
Given the support not far below around the 97-line, it will first be viewed as a spot to look for the DXY to hold. Should we see a bullish reaction off this line, longs may get another lift higher towards the cycle highs over 99 to the psychological level of 100 near the top of the channel.
If a breakdown develops, one confirmed by a weekly closing candle below the lower-bound of the channel into the area highlighted by the red box below, then the market could begin to quickly adjust its positioning and spark a sizable sell-off. For now, though, support is support until it isn’t.
DXY weekly chart (channel significant to outlook)
.png)
DXY daily chart (nearing support)
.png)
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
