CFTC Positioning Report: USD Index Still Facing Headwinds

Details of the latest CFTC Positioning Report for the week ended on June 9 indicates that gross short positions on the US Dollar have increased as at the last week, along with a reduction in net longs to 2-year lows. This was in spite of fears of a second wave of coronavirus infections following the easing of lockdowns. The report also came in before the Fed’s economic projections of Wednesday, June 10, so this may not have been factored in by investors as at the time the report was released. 

The CFTC report, therefore, keeps open the prospects of the USD Index encountering some headwinds, which could trigger a new wave of bearishness if the proper conditions are met. As today (Monday, June 15), the recovery in the DXY which started on Thursday following the Fed’s economic projections seems to have hit a wall on the daily chart, coinciding with a resistance level formed by previous lows. 

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Technical Outlook for USD Index

The DXY is down 0.08% on the day, which truncates two days of recovery on the back of the Fed’s action of Wednesday, June 10. The daily candles of Friday and today have stalled at the 97.16 resistance (lows of November 4 2019, January 15, 2020, and March 4 2020). today’s candle displays lower highs from Friday’s candle, and the setup is starting to look like a bearish harami. If the candle setup stays the same at the close of trading, we may see a resumption of the downside, which has the potential to target 96.46 as well as Wednesday’s lows at 95.72. The low of March 10 at 95.19 is also a potential downside target.

Conversely, a break above the 97.16 resistance has the potential to target 97.71 as well as 98.19. The 98.60 price level (November 29, 2019, and February 28, 2020 highs) remains a viable target as it is close to the 200-SMA dynamic resistance. Only a breach of this area brings in 99.42 into the target equation. Near-term, the sentiment for the DXY remains bearish, so upside price moves may search for potential areas of supply for the downtrend to resume. 

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