US dollar takes a trip to below critical support
|- DXY falls below crucial support that now is expected to be resistance.
- There are a number of fundamental cases for both the upside and downside prospects.
The US dollar lost its footing at a critical support structure according to the DXY chart as bears sabotaged the bullish prospects for the immediate future, from a technical perspective.
Fundamentally, the speculation of a US election outcome of a Blue wave victory has undermined the greenback.
The DXY also edged lower on news indicating a possible resumption of US stimulus talks
However, before the election outcome is known, investors may have to face the risk of a contested result and the impact on global growth of rising COVID-19 cases in Europe and elsewhere, according to analysts at Rabobank:
''We are of the view that risks associated with COVID-19, US-China tensions and the possibility of a contested US election are significant enough for the safe-haven USD to be boosted by short-covering in the coming months.'
''Continued signs of stress between China and the US which could temper the pace of the global recovery and lend support to safe-haven assets. We are forecasting EUR/USD at 1.17 on a 1-month view and see risk of a dip to 1.16 in 3 months,' the analysts at Rabobank added.
DXY market structure
The daily chart above shows the price of the DXY now critically trading below the 21-day moving average and the prior support structure that is now expected to resist on a retest.
On a break back above the structure, the bulls will be back in charge with enough fuel to test prior highs and better.
The chart below offers, however, a presumed correction and downside extension.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.