US Dollar Hits Strong Resistance – A Correction or Bear Trend Next?
The US Dollar rally has bounced from the 94.62 resistance level that I’ve marked in my articles through September. The level marks the March support that created a bounce before a steep downturn. The dollar has managed to mount a strong rally but we have to worry about whether it’s a a reaction rally in a bear trend.
The greenback has rallied on stronger U.S. economic data and clarity from the Federal Reserve about inflation targeting. The real issue is stimulus, which was a big part of the downtrend and the U.S. Congress has been unable to agree on a second stimulus package, whilst the Fed also stepped back from new measures. Fed Chair Powell and Treasury Secretary Mnuchin both agreed in testimony yesterday that further stimulus is needed and this may have forced traders to pause.
Today sees the release of durable goods orders in the U.S. with analysts expecting a figure of 1.5% after last month’s 11.4% rebound. The number measures the cost of orders for durable goods, received by manufacturers. Manufacturing PMI numbers have been strong in the last few months and the durable goods may get a bounce from this.
The U.S. election is just over a month away and both candidates have different attitudes about the direction of the world’s largest economy. This will surely add volatility as the vote gets closer, whilst the rising virus cases should see dollar support as a safe haven.
US Dollar Technical Outlook
The US Dollar index has mounted a strong bounce from the September 1st lows. The price broke out of a channel and then rallied through the 50 ma to a resistance level that marks the March support. This could cap gains now. A close above 94.62 would be bullish. We may pull back first to test lower levels with fibonnaci retracements at 93.00-93.50 being the likely destination. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.