The US elections uncertainty combined with the recent lockdown caused by the second wave of the coronavirus led the US dollar index to edge higher. Will the rally continue?
US Dollar Index Technical Analysis
- The US Dollar index price rallied to a multi-week high
- Neutral outlook while below 94.04
On Friday, the US Dollar index hit an over four-week high at 94.12 then retreated after. However, a weekly candlestick closed in the green with a 1.4% gain. Meanwhile, the Relative Strength Index (RSI) crossed above 50 signaling a possible start of bullish momentum.
Dollar Index Daily Price Chart (August 6 – November 3, 2020)
Chart source, Webtrader, Capex.com
On October 15, the Dollar index corrected its upward trend and started a sideways move creating lower highs with higher lows. Last week, the price closed above the 50-day SMA and yesterday the index moved to a higher trading zone 94.04 -95.25.
A daily close below the low end of the zone located at 94.04 reflects bull’s hesitation and could send the price towards the monthly support level at 91.72 ( Sep 1 Low).
On the other hand, another close above the low end of the zone indicates the bull’s intention to push the price further. As such, the Dollar index could rally towards the monthly resistance residing at 95.18 (Oct 2018 low).
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Dollar Index Four Hour Price Chart (September 21 –November 3, 2020)
Chart source, Webtrader, Capex.com
Last week, the US Dollar index traded above the slopping downward trendline originated from the September 25 high at 94.78 indicating a shift in favor of bulls control which has thus far held.
To conclude, the outlook of the US dollar index remains neutral even with the aforementioned bullish signals. That said, a break above 94.32 may trigger a rally towards 94.90 while a break below 93.35 could send the price even lower towards 92.40. As such, the support and resistance levels underlined on the chart should be watched closely.
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