US Dollar echoes weak technical tone ahead of FOMC

Month to date, versus a basket of six international currencies, the greenback is nearly 2.0% lower. Technically speaking, according to the latest Weekly Market Briefing, selling was likely on the table and should not really surprise.

Monthly chart: Room to extend losses

You will likely recall from the weekly report that the buck has been on the ropes since the beginning of Q4 in 2022 after recoiling from the underside of a monthly ascending channel resistance taken from the high of 103.82. And, as also put forward in recent analysis, the key observation is that the dollar remains depressed and technical expectations call for further selling towards support from 99.67 on the monthly.

In the context of the Relative Strength Index (RSI), the indicator has still yet to cross swords with its 50.00 centreline, which happens to be shadowed by an indicator trendline resistance-turned-support pencilled in from the high 82.87. Therefore, we could still push lower regarding momentum until reaching the aforementioned barriers.

Daily chart: Local support eyed though downside appears favoured

Following on from the Weekly Market Briefing, which also showed evidence of downside risks on the daily scale, we can see the US Dollar Index has indeed navigated south of its 50-day simple moving average at 103.44 and subsequently retested the underside of the dynamic value. Note that these averages can (and often do) establish support and resistance.

Local support exists around the 102.90ish region, which we may visit shortly. Yet, having noted room to manoeuvre south on the monthly scale—both on the price chart and the RSI—we can also see that scope to explore lower is evident on the daily chart. Alongside room to move south on the daily timeframe’s RSI indicator after recently taking out the 50.00 centreline and the price recently puncturing its 50-day simple moving average, clearance of 102.90 support is technically favoured, a move potentially supporting breakout sellers in the direction of daily demand coming in from 100.27-100.77.