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Technical Analysis – US dollar index buyers keep off but still present

  • US dollar index retreats despite bullish breakout

  • Stochastics move down; MACD holds near zero level

The US dollar index had an aggressive bullish rally after the bounce off the medium-term ascending trend line, surpassing all the moving average lines and the 105.10 barrier but is currently losing some ground ahead of the FOMC meeting today.

However, the mixed technical indicators are not convincing traders of the bullish scenario. The stochastic oscillator is pointing down in the overbought territory; however, the MACD is still developing above its trigger line in the negative region.

Hence, a downside correction could still be possible in the coming sessions. If the index slumps below the 105.10 support and the short-term SMAs, it could retest the medium-term uptrend line around 104.10. Otherwise, the sell-off could expand towards the 103.60 level, taken from the latest bearish spike.

On the other hand, if the price remains above the 105.10 bar, it could drive the index towards the 105.60 resistance. Moving higher, the 106.35 obstacle, registered back in the beginning of May, may open the way for more bullish actions.

In a nutshell, the dollar index has not eliminated downside risks yet. To boost buying confidence, the pair will need to crawl above 106.35. 

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