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USD Index Takes a Hit As the US Dollar Sells Off Across the Board

The USD Index has resumed the downward trend after some pretty heavy greenback selling this Tuesday. The dollar has been under sustained selling pressure for nearly four weeks now, and confirmation of this came from the latest CFTC Positioning report which confirmed a multi-month increase in USD shorts by institutional players and speculators. Positive manufacturing and services PMI data from the Eurozone has put the markets in the expectant mood for recovery, causing the abandonment of the safe-haven US Dollar.
Further reports from FOX News network indicate that an additional stimulus package of over $1 trillion is in the works. This money will cater to any extensions in unemployment benefits as well as increased traditional spending on infrastructure and other projects. Additional stimulus means that there will be more US Dollar supply, which will likely have a bearish impact on the greenback.

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Outlook for USD Index

The DXY is now trading at the 96.46 price support, after breaking below the rising wedge that marked the pullback from the downtrend that commenced 26 May 2020. The pullback terminated at the 38.2% Fibonacci level from the swing high of 25 May to the swing low of 10 June. With the US Dollar continuing to see selling pressure, the 96.46 is likely to see repeated tests. If that price level gives way, the 96.07 price level (12 March and 11 June lows) comes into play, with 95.72 standing by to assume the role of the new target if the decline persists.

Conversely, a bounce from 96.46 targets 96.94 (23.6% Fibonacci), with 97.16 and 97.71 continuing to remain potential resistance targets, attainable on a recovery of the US Dollar.

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