The mighty dollar appreciated against G10 currencies today as soaring energy prices fanned concerns about inflation and rate hikes.
Bulls were certainly in the driving seat, with the Dollar Index (DXY) jumping towards the 1-year high touched last week. Given how the DXY remains in an uptrend ahead of the US jobs report on Friday, the path of least resistance points north.
Over the past few days, we have discussed the fundamentals behind the dollar’s appreciation. Our focus this evening will be on the technicals using multiple time frame analysis.
Dollar Index approaches a psychological level
On the monthly timeframe, bulls seem to be gaining momentum with prices approaching the psychological 95.00 level. A solid monthly close above this point may signal further upside with the next major point of interest at 100.00. The last time the DXY traded at such levels was back in May 2020.
Weekly signals further upside
The subtitle says it all. There have been consistently higher highs and higher lows while the MACD trades to the upside. Bulls may propel the DXY towards 94.79 with 95.40 acting as the first point of interest. A strong weekly close above 95.40 could signal an incline towards 97.76 and potentially higher. Alternatively, a decline back below 93.44 should inspire bears to challenge 92.00.
Dollar eyes 94.52 on daily
After staging a rebound yesterday, dollar bulls remain on a mission to conquer the 94.52 level. A solid daily close above this point could open the doors towards 95.00. Should 94.52 prove to be reliable resistance, a decline towards 93.72 could be expected, followed by a deeper decline towards 93.19.
Breakout forming on H4 timeframe?
There could be a breakout opportunity on the H4 timeframe. Minor support can be found at 94.23, resistance is at 94.52 while the higher low is at 93.70. A solid breakdown below 94.25 could inspire a selloff towards 93.70. Should 94.25 prove to be reliable support, a move towards 94.52 looks possible with 95.00 acting as an important level of interest.
Given how the pending US jobs data may determine the Federal Reserve’s tapering schedule, things could turn explosively volatile for the dollar, whatever the outcome. Will Friday’s NFP strengthen the dollar’s grip in the FX space or threaten its reign? Time will tell.
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