The US Dollar index (DXY) has quietly started to trade higher and looks to have bottomed out on November 1. As it is rather typical, the markets turn around when people are least expecting it. On October 1, the Dollar reached a new 2019 high, and the majority of analysts and investors were talking about “King Dollar,” however, in hindsight it was also the same day the dollar peaked. In the rest of October the dollar declined by 2.55%, and created a low on October 18, which was followed by a double bottom on November 1.
The move higher was not surprising given that the Federal Reserve cut and the paused their rate cuts. The latest Non-Farm payroll reports were also much better than projected, and leading economic indicators are stabilizing in the US and the rest of the world.
Technically we also received hints by the daily RSI-14 indicator reaching oversold levels. Also, the price was about to reach a trend line that supported the Dollar index in June and September 2018, and June 2019. But the final indication that the dollar was about to turn higher was when the prices spiked above the October 1 high of 98, as it confirmed that double bottom was in place.
The completion of the double bottom pattern is now suggesting that the dollar index might be able to reach the 98.74 level. The trend will remain upwards above the November 1 low of 97.09, and traders wishing an improved risk-reward ratio will wait for a price correction before adding to their exposure.