A Double Bottom for the Dollar Basket?

Adinah Brown Leverate

The US dollar basket (DXY) may be traded as a futures instrument or an ETF, but it is also important index watched by the entire market as a gauge of US dollar strength or weakness. It measures the value of the USD relative to a basket of currencies with the euro being the largest weight at 57.6%. For the last couple of weeks, there has been a lot of volatility and noise in the market and so keeping an eye on the DXY is an effective way to average out US dollar price behaviour.

Looking at the US dollar index chart, we can see that price fell below a floor of support to an important historical level. Since then the price has been put in a double bottom, bouncing upwards from this historical level twice. Double tops or double bottoms are very popular among traders as they signify a successful test and price rejection from a recent new high (or low). A double bottom signifies a very strong level of support and buyers have confidence in trading the currency pair long because the odds of price continuing lower is reduced.

On the other hand, the price has trouble bouncing higher than the continuation of the line that was previously acted as support, but now a level of resistance. It is for this reason that the DXY will possibly consolidate a little longer, but should it bounce back above the support-turned-resistance line or move below the latest support line, (thereby negating its importance) we will finally be able to determine where the US dollar is generally headed. If the DXY appreciates, convincingly back above 91, then going long on the US dollar could be a potentially strong medium-long term trading idea.

Author

Adinah Brown

Leverate

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.