USD Index Could Decline Below 89.00 On Pending Home Sales Slump

Summary:

The USD Index (DXY) slumps further and could drop below 89.00 as Pending Home Sales suffer a huge slump on a monthly and annualized basis.

The USD Index (DXY) extended its intraday decline after US Pending Home Sales fell sharply in January. Data released by the National Association of Realtors showed that Pending Home Sales dropped 2.8% in January, which was worse than the market consensus of a 0.2% increase. The previous month showed an increase of 0.5%. On an annualized basis, Pending Home Sales was up 13%, compared to analysts’ estimate of 19.5%.

This data set was just what bears on the USD Index needed to extend the decline after positive durable goods orders had appeared to provide some support for the greenback in early New York trading.

Technical Levels to Watch

A potential head and shoulders pattern is forming on the daily chart, with a neckline at 90.228. Today’s decline in the US Dollar Index has confirmed the pattern and put the support 89.741 at increased risk of a breakdown. If this support level collapses, this will open the door for the

US Dollar Index to target the 89.189 price level as the next barrier in line (recent lows of 7 January 2021), thus completing the pattern’s measured move. If the USD Index continues to decline, the index may hit new multi-year lows at 88.297, with 87.247 lining up as an additional downside target.