Is the U.S. dollar bracing to extend its late September uptrend?
The U.S. Dollar Index (DXY) is fast approaching a key support zone that could draw in buying pressure.
Here’s what we’re seeing on the 4-hour time frame:
U.S. Dollar Index (DXY) 4-hour Forex Chart by TV
The U.S. dollar is giving back part of last week’s gains as traders turn cautious ahead of a possible government shutdown.
Uncertainty is also hanging over this week’s labor market reports, especially after several FOMC members stressed upside inflation risks and their data-dependent stance.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
DXY, which has been making higher highs and lows since mid-September, turned lower from 98.60 and is now hovering near the 98.00 psychological level.
We’re watching the 97.75 zone, which lines up with the 50%–61.8% Fib retracement of September’s upswing, a broken descending channel resistance, the 200 SMA on the 4-hour chart, and trend line support.
Bullish candlesticks and sustained buying from that area could send DXY back to 98.00, if not the 98.50 mark or new September highs.
But if the downswing extends, the index could slip below trend line support and retest 97.50 at the broken channel and last week’s lows.
Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment!
If you’re not familiar with the DXY, check out our lesson, What is the US Dollar Index?
Disclaimer:
Please be aware that the technical analysis content provided herein is for informational and educational purposes only. It should not be construed as trading advice or a suggestion of any specific directional bias. Technical analysis is just one aspect of a comprehensive trading strategy. The technical setups discussed are intended to highlight potential areas of interest that other traders may be observing. Ultimately, all trading decisions, risk management strategies, and their resulting outcomes are the sole responsibility of each individual trader. Please trade responsibly.
