The US Dollar remains under selling pressure versus the other major currencies, even if the Federal Reserve has decided to increase the Federal Funds Rate again in March. The greenback posted some gains against its rivals in the last weeks, but I’m afraid that the rebound has ended because the USDX is showing some exhaustion signs in the short term.
The Dollar could drop again as the dollar index has failed to stay higher and to make new highs. USDX is trading at 89.77 level and looks undecided on the short term. It is moving sideways, but the bearish bias remains intact as the rate is located much below some very strong resistance level.
USD increased significantly only versus the Yen and versus the Swiss Franc in the last days and remains to see if the pairs will have enough energy to make new highs. The USD needs a strong support from the United States economic data in the upcoming period to be able to dominate the currency market again. This scenario is less likely to happen.
I’ve added the USDX’s Daily chart to show you why the USD could drop again and what are the other perspectives. The index has found strong support at the 50% Fibonacci line (descending dotted line). It has made several false breakdowns below this dynamic support. The minor rebound was natural and expected.
The dollar index moves in a range in the short term. It remains to see if this will be an accumulation or a distribution movement. Price failed to reach and retest the 91.01 static resistance and the first downtrend line (DT1) signaling a selling pressure. It seems like that the USDX is developing a Falling Wedge pattern on the Daily chart, but I’m not very confident that the price could make a valid breakout at this moment.
The failure to approach and reach the median line (ML) of the major descending pitchfork could send the rate towards the 50% Fibonacci line again. A further US Dollar drop will force the greenback to lose more ground versus all its rivals.
I’ve added another chart to show you what happened in the last weeks. Technically, the USDX is somehow expected to drop after the failure to stabilize above the 50% Fibonacci line (ascending dotted line). You can notice that the rate has failed to reach this line in the last attempt and now is expected to reach the lower median line (lml) again.
A valid breakdown below the lower median line (lml) will confirm a further drop and a USD’s further depreciation. Only a rejection from the lower median line (lml) or a false breakdown will announce another upside momentum.
Conclusion
The USD’s future will be decided by the dollar index in the upcoming period. USDX is narrowing, so we should wait for a breakout from this range to see the direction. The USD wasn’t too impressed with the US Retail Sales data today. The indicator increased by 0.6%, beating the 0.4%, but the dollar stays lower as the USDX plunged in the last hours.
