Lack of action in the US Dollar as the Independence Day Holiday kicks off continues to show on the USD Index, as today’s candle thins out into a doji, leaving price unchanged from yesterday’s at 97.21.
Yesterday’s upside from the stellar US jobs report quickly petered out as the rise in coronavirus cases in the US starts to weigh on sentiment there. This has translated into a static DXY reading which has seen a stall in the slight upside recovery after days of slumping prices.
The local coronavirus situation could become a big deal if cases continue to rise geometrically, as has been the case in the last three weeks.
Technical Outlook for USD Index
The DXY is currently trading in the ascending channel, which can be described as the consolidation phase of the bearish flag pattern, if the previous slump from 25 May is factored into the equation. Price is barely holding on above the 97.16 support level, found within the channel. If the price can bounce from this level, it may target 97.71 and 98.29 as it makes it way to the channel’s return line. Only a breakout above the 98.29 resistance would allow 98.60 and 99.42 to come into the picture, which would also invalidate the bearish flag setup.
Conversely, a breakdown of 97.16 puts the integrity of the channel’s trendline in jeopardy, and if this gives way as well, then the bearish flag would have evolved. 94.62 corresponds to the measured move from the channel’s breakout point, but the completion of such a move would depend on the DXY price candles taking out 96.46 and 95.72 along the way.
DXY Daily Chart