The US dollar index had a mixed week on the foreign exchange market last week as bulls were unable to make a new multi-month high, and sellers were incapable of cracking key technical support.
Last week’s soft US jobs report muddled the picture for the US dollar index completely. No longer is tapering a complete certainty, meaning that some traders will now be repositioning.
Additionally, the prospect of the coming $2 trillion infrastructure bill is probably US dollar bearish, because this will add to the United States fiscal burden and FX traders overall appetite to move into other risky currencies.
The technicals are very clear for the greenback right now. The lower time frame action is between the 93.70 to 94.44 region. A break from this area should start a 50-point directional move.
Additionally, higher time fame analysis is clear. Failure to form another meaningful high set up the prospect of a double or triple top pattern on the daily time frame, which is very bearish for the medium-term.
The ActivTrader market sentiment tool is showing that some 57 percent of traders are bearish towards the US dollar index. This is big chance from the ultra-bearish sentiment seen last week. This could be could for the bears.
Ideally, we need to see traders turning extremely bullish towards the greenback right at the top of its multi-year trading range, around the 94.80. This would be a great sign that a bearish correction or reversal is coming.
US Dollar Index short-term Technical Analysis
Looking at the four-hour time frame, the technicals are fascinating right now. Depending on which way you look at things, either a double-top or inverted head and shoulders pattern is in play.
One thing is for sure, expect a major directional move in the US dollar index in the short-term once the 93.70 to 94.45 price range is broken.
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US Dollar Index Medium-term Technical Analysis
Failure to move above the top of the yearly range this could spark a huge multi-month sell-off in the US dollar index towards the bottom of the range. So bulls be warned.
Equally, a breakout above the top of the range, close to the 94.80 level, could cause a major bullish move in the US dollar index towards the 95.50 or 96.00 area.
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