- The USDX ended this week trading just under a technical level which is comprised of the following elements: previous price structure support lows from June (see far left of figure 1 chart), the 50% corrective retrace of 72.69 - 84.1 and an FE 161.8 extension area.
- This comes in the context of the EUR/USD printing a higher weekly close (albeit marginal) after four consecutive lower closes. Our dollar index analysis typically places a particular focus on the EUR as it holds a 57.6% weight metric in the basket of forex currencies making up the USDX.
- We also note that large FX futures speculators were net long the US dollar, as of last Tuesday, when referencing the latest commitment of traders report from the CFTC. This key group held an aggregated $320 million in bearish wagers against the USD last week; by contrast the large specs are now holding a $3.1 billion net USD long FX position.
- While this positioning data suggests the USD is in favour with hedge funds, large institutions and the other key currency speculators, the corrective risk is that the the dollar is overbought in the near term. With this in mind we will be monitoring the 81.30 area technical level referenced above for any indication of an impending reversal.
- In the event of a shift in market sentiment, with any subsequent USD downside, we will be monitoring the previous resistance area around 80.00 which may prove to be supportive for the dollar index.
USDX Daily Chart - (figure 1)
USDX Weekly Chart - (figure 2)