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.

Ross J Burland FXStreet

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.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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