U.S. Dollar Boxed in Before Major Events
The U.S. dollar had its worst month in nine years in July. It continued lower in August but is now trying to bounce. The greenback is also squeezing between some potentially important levels.
To the upside, DXY is hitting resistance at the March low of 94.65.
To the downside, DXY is testing the 94 area. This was a support zone in September 2018, and then resistance in early August.
Another chart feature on the dollar is this month’s outside candle. DXY tested a 28-month low of 91.75 early on September 1, but quickly rebounded. It then shot past the August high. That kind of price action could suggest bulls have taken control once again.
Finally, there are economic and political events to watch. On one hand, everyone knows that the Federal Reserve is uber-dovish and will keep interest rates low. That’s likely priced in after so much news coverage.
On the other hand, there could be upside surprises for the U.S. dollar. Today’s consumer confidence report, for example, shot back above 100 for the first time since the pandemic began. That could bode well for tomorrow’s ADP payrolls report and Friday’s non-farm payrolls. Strong numbers on either could boost the dollar.
Then you have politics. Trump’s unexpected victory in 2016 sent the U.S. dollar to its highest level in more than a decade. That bullish price action could return if he does well in tonight’s debate or rises in the polls. And, regardless of who takes the White House, another stimulus or infrastructure bill could also lift the dollar.
In conclusion, “sell the dollar” was a widely held view earlier this year. But price action is no longer cooperating with it. Traders may want to be on guard for unexpected strength in the greenback.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
To the upside, DXY is hitting resistance at the March low of 94.65.
To the downside, DXY is testing the 94 area. This was a support zone in September 2018, and then resistance in early August.
Another chart feature on the dollar is this month’s outside candle. DXY tested a 28-month low of 91.75 early on September 1, but quickly rebounded. It then shot past the August high. That kind of price action could suggest bulls have taken control once again.
Finally, there are economic and political events to watch. On one hand, everyone knows that the Federal Reserve is uber-dovish and will keep interest rates low. That’s likely priced in after so much news coverage.
On the other hand, there could be upside surprises for the U.S. dollar. Today’s consumer confidence report, for example, shot back above 100 for the first time since the pandemic began. That could bode well for tomorrow’s ADP payrolls report and Friday’s non-farm payrolls. Strong numbers on either could boost the dollar.
Then you have politics. Trump’s unexpected victory in 2016 sent the U.S. dollar to its highest level in more than a decade. That bullish price action could return if he does well in tonight’s debate or rises in the polls. And, regardless of who takes the White House, another stimulus or infrastructure bill could also lift the dollar.
In conclusion, “sell the dollar” was a widely held view earlier this year. But price action is no longer cooperating with it. Traders may want to be on guard for unexpected strength in the greenback.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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