US Dollar Index Breaks Jinx: Set for First Weekly Gain Since June 2020

Summary:

USD Index set to break 2-month jinx as greater US Dollar demand allows the US Dollar index to post gains that could end in a higher close for the week.

The US Dollar Index looks set to break the losing jinx that has beset it for the past nine weeks, as it is well on its way to its first weekly gain in nine on the back of US Dollar demand. Demand for the greenback was restored after the FOMC minutes on Wednesday, and follow-up home sales and manufacturing PMI data released on Friday exceeded expectations, allowing the US Dollar to consolidate its gains for the week.

Friday brought about broad-based USD strength on several currencies such as the British Pound and Canadian Dollar. Data from Statistics Canada showed Retail Sales data for June that did not meet market expectations. A further decline in crude oil prices pressurized the CAD and forced it to lose ground to the greenback. Additional disappointing data from the UK also sent the Pound 1% lower against the buck.

Furthermore, the Markit’s Manufacturing and Services PMI figures for August beat market expectations, allowing the US Dollar to recover on the improvement in real estate and private sector business conditions.

Consequently, the US Dollar Index (DXY) was able to overcome yesterday’s disappointment on the rise in initial jobless claims and hit 93.34 as at the time of writing. Currently, the DXY is up 0.64% and barring any unforeseen circumstances, looks good to end the week higher for the first time in nine weeks.

Technical Outlook for DXY

The price action has formed a descending channel, and today’s spike is testing the upper channel border. Price has also violated the 93.17 resistance but requires a second penetration close above this price level to confirm the break. Only then will 93.80 become a realistic target, with 94.62 and 95.19 serving as possible targets to the north.

Conversely, rejection at the current resistance allows the DXY to dip towards 92.50, with 91.91 and 90.97 queueing up as potential targets to the south.