The US dollar index is perilously close to dropping below 92.00 after the CFTC Positioning Report showed that the net USD short positions had spiked to 2-week highs. The report for the week that ended on August 25 showed that net shorts on the greenback had risen to 7,800 contracts.
Accounting for this spike in net USD shorts is the fact that traders had resumed selling on the greenback after the FOMC Chief’s dovish announcement last week. The adoption of a new inflation targeting system which would focus on an average value of around 2% as opposed to its previous hard target of 2% set the stage for the rise in USD shorts.
The US Dollar Index resumed its bearish trend on the announcement and has fallen below the 92.50 support line. The DXY currently trades at 92.20 and is now dangerously close to falling below the 92.00 mark, which would send it to lows not seen since April 2018.
Key fundamentals this week include the US Non-Farm Payrolls report, scheduled for Friday, September 4. The markets are expecting 1518K jobs to have been added to the economy, a drop from the previous figure of 1763K. Some analysts such as those at ING Economics predict that the actual number will likely miss consensus targets, which could put the greenback and the USD Index under additional pressure.
Technical Outlook for USD Index
The USD Index silently makes its march towards the opposing channel border, having been rejected at the upper channel border on Wednesday following the FOMC announcement. This move would have to overcome the 91.91 support level and would put the index firmly into the territory marked by the 2018 lows. 90.97 could form the next support level if price falls below the channel.
On the flip side, a bounce on the 91.91 support or even the 92.00 psychological support may allow the DXY to retest 92.50. Above this level, an additional reprieve comes the way of the USD index if it can cross the channel’s upper border/the resistance at 93.17. This move would set up 93.80 and possibly 94.62 as additional rendezvous points for the DXY.
USD Index Daily Chart