The US Dollar index is at an important resistance level after the recent rally the price action here will decide whether we see continuation move higher, or drop back to support levels.
Today sees new home sales released with analysts expecting a 2.4% increase compared to 24.7% in the previous month. We will also hear a testimony from the Federal Reserve Chair Jerome Powell. There are also speeches by other Fed officials this week and this will help to drive the USD if they add clarity to the central bank’s plans to target inflation. Powell noted a desire to stick to a 2% inflation goal, but he was vague on what stimulus may be required, or a potential timeline.
Last week, investors worried about the ability of Congress to reach another stimulus agreement and political uncertainty increased over the weekend with the death of U.S. Supreme Court justice Ruth Bader Ginsburg. President Donald Trump wants to name his pick to fill the vacant seat this week but Democrats are unhappy with this. The frontrunner is said to be Amy Coney Barrett and her appointment would see a 6-3 conservative majority in the highest court. That majority would also be important for the upcoming election.
With just over a month until the election, we can expect further volatility in the USD. We are also seeing a move towards a second lockdown in the U.K. and parts of Europe. This could also be a key factor in the outlook for the USD rally and we can’t discount a return to strict measures in the United States.
The US Dollar index now tests resistance near the 94.00 level and this aligns with the highs of early-August, whilst we also see obstacles with the 50-day moving average and a potential head and shoulders formation so this is an important level. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
