- The prevailing risk appetite dragged the DXY to week-long lows on the first day of the week.
- Falling along a downtrend channel constitutes the formation of a bullish pennant.
- The bullish oscillators on the daily chart add credibility to the constructive setup.
The US Dollar Index (DXY) it maintained its offered pitch during the first North American session and fell to week-long lows around the 92.60 region in the last hour.
As investors looked beyond the successful US NFP report on Friday, the prevailing climate of risk appetite was seen as a key factor undermining the safe-haven dollar. Even a modest rise in US Treasury yields, the optimistic US PMI figures failed to impress the USD bulls, although the optimistic US economic outlook should help. limit any further losses.
Looking at the technical picture, the recent pullback from multi-month highs has occurred along a downward sloping channel. Since the DXY has now dipped below the 200 hourly SMA, the intraday bias appears to be tilted in favor of bearish traders. The negative outlook is reinforced by bearish technical indicators on the hourly charts.
That said, the aforementioned channel constitutes the formation of a bullish flag pattern. Also, the oscillators on the daily chart, although they have been retreating from higher levels, are still comfortably held in bullish territory. Therefore, any subsequent drop could be considered a buying opportunity.
Meanwhile, the lower bound of the mentioned channel coincides with the 23.6% Fibonacci level of the 103.00-89.21 dip. This, in turn, should now act as a strong foundation for the DXY, which if it breaks decisively will lay the groundwork for further losses to test the very important 200-day SMA, around 92.50.
On the other hand, the 92.85-90 region (200 hourly SMA) now appears to act as immediate resistance. This is followed by the upper boundary of the descending channel, currently near the 93.10 region. A convincing advance will confirm a bullish breakout and push the DXY towards multi-month highs, around the 93.45-50 region.
1 hour chart
Technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
