DXY continues higher! Where to next?

The main beneficiary from such a move would be EUR/USD.

FOREX 6

Earlier, we wrote that the DXY was holding key resistance near 91.50 and had pulled back after the BOE said they did not intend to give the impression to the markets that they would take interest rates negative.  That didn’t last very long!!  The US Dollar Index later broke higher(and XAU/USD pushed lower through the 1800 level!).   Where can the DXY go from here?

On a daily timeframe the US Dollar Index moved out of the support zone on February 1st (light blue area).  However, today the DXY moved above prior highs from December 7th, 2020 at 91.24.  Resistance above is now at previous lows from September 1st at 91.73 .  If price moves above there, the next resistance level is near  92.00. In addition to the psychological round number resistance,  92.00 is also the lows from November 23rd, 2020, as well as, the 50% Fibonacci retracement level from the highs of November 4th, 2020 to the lows of January 6th.  Watch for bears to enter the market near this level!  Above there, resistance is the at 61.8% Fibonacci retracement level from the previously mentioned timeframe, near 92.32. Support is back at the intraday breakout level of 91.24 where bulls will be looking to re-enter long positions and continue the move higher. Support below there is at 91.02.

Source: Tradingview, City Index

The Euro makes up 58% of the DXY.  Therefore, a breakout higher in the US Dollar index is likely to affect EUR/USD the most.   With today’s move in DXY, EUR/USD fell below some key support.  The most notable support level was a weekly trendline dating back to May 2020 (red).  Price also fell below previous resistance at 1.2011, a downward sloping trendline and psychological support at 1.2000 and the 50% retracement level from the lows of November 4th, 2020 to the January 6th highs at 1.1975.  These levels all act as resistance now, where bears will be looking to enter the market to continue pushing the pair lower. Horizontal support below sits at 1.1920 and the 61.8% Fibonacci retracement level of the previously mentioned timeframe, near 1.1885. 

Source: Tradingview, City Index

As the DXY has broken out today above 91.24, the index can quickly move towards 92.00.  The main beneficiary from such a move would be EUR/USD.  Watch for bears to continue to push the pair lower if it can bounce to the 1.1975/1.2000 level.

Learn more about forex trading opportunities.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.