US Dollar - Correction Seems Likely Ahead Of CB Consumer Confidence

Technical Bias: Bullish

Key Takeaways

• US dollar looks poised for a short-term correction against the Euro and British pound.

• US dollar index is eyeing a test of 50 simple moving average (4H) moving ahead.

• A major support seen at 85.05 and resistance ahead at 85.90.

The US dollar is trading around extreme levels against a basket of currencies including the Euro, British pound and New Zealand dollar, which has increased the chances of a short-term retracement.

Technical Analysis

The US dollar index 4 hour chart clearly suggests that the US dollar is in an uptrend from a long time. There are two bullish trend lines, one is a short-term and another is a mid-term. However, the most important point to note is that both the trend lines are supported by the key simple moving averages such as 50 and 100 (4H). Recently, the US dollar index registered a high of 85.87 level, and it looks like it might correct lower towards the first bullish trend line. Moreover, the 38.2% Fibonacci retracement level of the last leg from the 83.85 low to 85.87 high also sits around the highlighted trend line. So, if the US dollar corrects lower, then it could find support around the 85.10 level, followed by the 100 SMA (4H).

On the other hand, there is a possibility that it might not test the mentioned support area and continue heading higher. In that situation, a break above the recent high might call for more gains moving ahead.

CB Consumer Confidence

Later during the New York session, the CB consumer confidence report will be published by the Conference Board. The forecast is of a minor rise from 92.4 to 92.5. If the outcome deviates from the expectation, then the US dollar might correct lower in the short term. There is an RSI divergence on the 4 hour timeframe, which can be considered as a warning sign of a short-term pullback.