The US dollar index has extended its recovery into the second day, building on the momentum gained after the US non-farm payrolls report on Friday exceeded market expectations. This has allowed the USD index to check the free fall it was experiencing after staging an extended losing streak which has seen its gain in only eight out of the last twenty-six trading sessions.
However, it is not yet time for celebration as the US dollar continues to face significant headwinds from rising coronavirus cases across the country. The US now has more than 5 million coronavirus cases, with new cases being concentrated in Florida, California, Texas and Georgia. Thus, the overall negative outlook on the US Dollar and the USD Index remains intact.
Technical Outlook for USD Index
The US Dollar Index is adding to Friday’s gains and is currently trading at 93.51, or 0.12% higher on the day. Today’s higher high places the index on course to make contact with the 93.80 resistance (29 July and 4 August highs), which remains the key area to be breached for price advance towards 94.62 and possibly 95.03/95.19 to occur. The picture on the daily chart resembles that of an evolving double bottom pattern, which needs the neckline at 93.80 to be broken to the upside to complete the pattern and make a strong case for further recovery.
On the flip side, a rejection at 93.80 could allow the USD Index resume its slide, which then targets the 93.17 support initially, with 92.50 lining up to the south if 93.17 is taken out by the bears.
USD Index (DXY) Daily Chart