DXY continues to surge; EUR/USD lower
DXY began moving higher in May 2021 as the Fed hinted that it may be ready to begin quantitative tightening. Throughout the last year, inflation increased dramatically, and so did the value of the DXY. The US Dollar Index traded in an orderly rising channel from a low of 89.53 on May 25th until it broke out of the top of the channel to today’s high of 102.07. There are 2 main reasons for the aggressive move higher since April 5th : 1) rumors of faster than previously expected rate hikes 2) lockdowns in China due to the coronavirus, particularly in Shanghai and now possibly even Beijing. It now seems like the US Dollar Index is on a mission to reach the highs from March 2020 at 102.99. However, notice that price is diverging with the RSI, an indication that the DXY may be ready for a near-term pullback.
Source: Tradingview, Stone X
Trade DXY now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
On a 240-minute timeframe, the DXY is trading near the 161.8% Fibonacci extension from the highs of April 20th to the low of April 21st. In addition, the index broke below a rising wedge and is currently testing the underside of the bottom trendline of the wedge. First resistance is at the apex of the wedge near 102.13, just ahead of the March 2020 highs at 102.99. Notice the RSI is also in overbought territory on the short-term timeframe as well, increasing the possibility for a near-term pullback. First support is at today’s low of 101.51. Below there, horizontal support is at 101.04 and 100.58.
Source: Tradingview, Stone X
EUR/USD makes up over 57% of the DXY. Therefore, the pair often moves in the opposite direction as the US Dollar Index. On the daily timeframe, the pair has been moving lower in an orderly channel since May 2021 from a high of 1.2263 to today’s low of 1.0662. Just as DXY is approaching the March 2020 highs, EUR/USD is approaching the March 2020 lows at 1.0636. Below there, the next support level isn’t until the lows of January 2017 at 1.0340. However, price and the RSI are diverging, indicating that EUR/USD may be ready for a near-term bounce. First horizontal resistance is at the April 19th lows at 1.0761, then the bottom of the shooting star candlestick on April 21st at 1.0824.
Source: Tradingview, Stone X
Trade EUR/USD now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
DXY has been on a tear higher for most of the last year. More recently, the US Dollar Index has broken above the top trendline of the upward sloping channel and is gunning for the March 2020 highs. As EUR/USD moves inversely to DXY, if DXY doe reach 102.99, watch for EUR/USD to reach its 2020 lows.
Learn more about forex trading opportunities.
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
City Index is a trading name of StoneX Financial Pty Ltd.
The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.
While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.
StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.
It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.
StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.
© City Index 2024