November 2, 2021 15:45:15

Weekly DXY: Consolidation above multiple levels of resistance

We can see on the weekly chart, the widely watched Dollar Index (DXY) looks to have formed a double bottom reversal pattern around 90 during January and May earlier this year. The measured move, which is the distance from the reaction extreme to the next price target, comes in roughly around 94.90 Since May, prices have been edging higher. But after five weeks of gains from September, bulls came up against resistance around 94.50.

We have been consolidating below here as this level marks a major zone of resistance. This area includes the October high at 94.56 and the March 2020 spike low at 94.65. The 200-week moving average also sits just above here at 94.79.

Last week’s bullish engulfing pattern looks positive for the greenback’s overall performance outlook. But much depends on the Fed and Friday’s NFP data. Initial support around 93.27/50 needs watching if the policymakers or job numbers disappoint again.

Daily DXY: Bounces off trendline support

We can clearly see the ascending channel of higher highs and higher lows from the May/June trough on the daily chart. Prices have been well supported by both the 50-day SMA and the upward trendline from May.

After topping out in September and October above 94.50, we are back trading just below 94. Momentum is fairly subdued at the moment which you would expect with traders neutral ahead of the upcoming risk events.

If oscillators turn more bullish, then a decisive break to the upside through the zone targets the June 2020 low at 95.71. The 50-day SMA and trendline support come in around 94.37/40.