U.S. DOLLAR TECHNICAL FORECAST: BULLISH
- NFP undershoot complicates labor outlook and hawkish Fed.
- Technical patterns level to long-term upside.
DXY FUNDAMENTAL BACKDROP
This week Non-Farm Payrolls (NFP) but once more underwhelmed after a stellar ADP print, coming in at 199K for December. Although the unemployment price seemingly constructive, the participation price is barely weaker. In abstract, not a really conclusive report which brings into query the Fed’s aggressive tightening outlook – because it assumes a powerful labor market which can not essentially be the case.
USD ECONOMIC CALENDAR
Source: DailyFX financial calendar
TECHNICAL ANALYSIS
U.S. DOLLAR INDEX WEEKLY CHART
Chart ready by Warren Venketas, IG
The weekly DXY chart above outlines the rollercoaster journey from March 2020 to current. The greenback has roughly clawed again 50% off the losses skilled throughout that interval and now sits at ranges final seen in July 2020. The form of the restoration since then resembles that of a cup and deal with formation with value motion at present inside the deal with (blue) growth.
Considering the Relative Strength Index (RSI) is coming off overbought territory, there’s room for additional draw back earlier than a push increased (breakout above deal with resistance). Long-term I nonetheless favor greenback upside regardless of markets largely pricing on this bullish outlook.
U.S. DOLLAR INDEX DAILY CHART
Chart ready by Warren Venketas, IG
With consideration on the every day chart, this week has been per week of doji candlesticks hinting to market uncertainty round path and momentum. With markets seeking to NFPs for readability, it might have seemingly added additional confusion to the present equation. That being stated, the short-term technical setup stays skewed to the upside however a break (candle shut) beneath 96.00 might open up room for bears to focus on the November swing low at 95.49.
From a bullish perspective, a push above 96.50 alongside bull flag resistance, ought to deliver into consideration the 97.00psychological deal with.
Resistance ranges:
- 97.00
- 96.50/bull flag resistance
Support ranges:
Contact and observe Warren on Twitter: @WVenketas
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