Dollar Index Technical Update WC August 6th
- The USDX is once again trading at the 61.8% retrace level from the last swing higher. The USD will be testing this near term key Fibonacci support level, around 82.30, heading into the new week, a technical level we have been monitoring over recent weeks.
- Major volatility has been seen this week with the commodity currencies seeing gains against the greenback and other currency counterparts. The NZD and AUD once again top the currency strength chart with USD and JPY at the bottom seen as the weakest.
- USDX price is also trading just above an ascending trend line, any break below Thursdays daily low would be bearish for the dollar as this would represent both a move under range lows and trend line break.
- Net short EUR positioning hit an all time record, over -200K contracts, a couple of months ago. This figure now resides around the 139K level as of Friday (data lags and shows the prior Tuesday). The latest COT report update represents a 10% weekly decline in EUR shorts. The shows the futures market is still bearish the EUR (EUR FX CME) but looks to be covering shorts and possibly anticipating a move higher for EURUSD and therefore a lower USDX. We reference EUR COT report data as the EUR is the most heavily weighted USDX currency.
- A corrective continuation to the upside from this 61.8% retrace level could potentially see resistance around the 83.00 level which is aligned with Thursdays high. Further to this is the 84.00 area which is the recent range high.
- The whipsaw price action is not painting a clear picture – largely fuelled by the significant event risk this past week – but the failure to extend Thursdays gain for the dollar is not inspiring confidence is a USDX strength scenario.