US Dollar Index Maintains Slow March Towards 94.00

The US Dollar index is on its way to posting a 6th straight winning session as the US Dollar retained slight bidding demand on the first trading day of the week following the US Labor Day holiday. The bounce on the asset from the previous support levels is extending further north, but only just on a day where there is very little news in the market. 

Comments by White House Chief of Staff Mark Meadows about the possibility of a coronavirus stimulus bill being agreed to by all parties before the November 3 presidential election did very little to move the greenback. This allows the USD Index to continue to ride on sentiment from last week’s Non-Farm Payrolls numbers, as it continues its slow ascent towards 94.00. 

Technical Outlook for the USD Index

Very little is happening on the fundamental front this week, as the shine will be taken by the European and Canadian Central banks. These will bring the EURUSD and USDCAD into focus on Wednesday and Thursday, with the potential for the US Dollar to either gain from negative action from the ECB and BoC, or to resume the previous downtrend. So far, the upside moves on the USD Index are retracements within the prevailing downtrend. 

This upside retracement is now meeting resistance at the upper border of the channel, which also intersects the 93.17 resistance level. A break above these levels continues the upside pullback, targeting 93.80 and possibly 94.62 thereafter. 

On the flip side, bears may just be biding their time to decide when to explode into action. If the USD Index fails to clear the current resistance levels, this may provide impetus for sellers to put the DXY on offer, targeting 92.50 and 91.91 on the way down to the April 2018 lows at 90.97.

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