USD Bullish Reversal Risks
The decline in the US Dollar has seen the Dollar index trading lower within a tight bearish channel over recent months. Price has recently broken below the rising trend line from 2021 lows and is now sitting on support at the 89.64 level. While the trend is bearish for now and both RSI and MACD are bearish, it is worth noting bullish divergence on both indicators over the most recent leg of the decline.
In consideration of this, there are upside risks given the amount of Dollar selling over recent months and the potential for a sharp reversal if these positions are unwound. If the current base can hold and the dollar can break above the bear channel, I will be monitoring a break back above the 90.98 resistance for a move back up to 92.07 level Initially.
Key Data to Watch
The key reading to watch this week will be the US Q2 prelim GDP print on Thursday. The market is currently forecasting a reading of 6.4%, unchanged from last time around. However, given the increased optimism around the government’s vaccination push, as well as the broader reopening underway across most of the country, the risks are clearly tilted higher here and should data beat expectations, USD is likely to catch a firm bid.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.