US Dollar Technical Forecast: Bearish
- It was a big week for US Dollar bears as the currency pushed down to a fresh two-year-low, breaking below a number of support levels in the process.
- Can the move hold? Next week’s ECB rate decision is huge for this theme.
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
It was a brutal week in the Greenback as the US Dollar dropped by as much as 1.71%. But, perhaps more pertinent than the size of the move itself was where it took place on the chart, as the US Dollar pushed through a number of support levels along the way while selling-off this week.
Perhaps most interestingly, we haven’t even gotten word of that stimulus deal that everyone seems to be waiting on. As US equities posture near all-time-highs, even with optimism driven by Covid vaccines, confirmation of a stimulus program continues to wait as Congress volleys details of how that program might ultimately look.
But, that impasse seemed to matter little this week in the US Dollar as the currency put in an outsized bearish move on its way down to fresh two-year-lows. Prices finally found a bit of support on Thursday trade, and that support held into the weekend. This comes from the price of 90.49, and this is the 14.4% Fibonacci retracement of the 2017-2018 major move. The big question is for how long might this hold, as sellers were extremely aggressive early in the week and it doesn’t look as though there are many factors of favor for USD-bulls at the moment.
US Dollar Weekly Price Chart: Support Appears After a Tumultuous Fall
Chart prepared by James Stanley; USD, DXY on Tradingview
EUR/USD Breaks Above 1.2000 Psychological level
If there’s going to be a wicked reversal scenario in store for FX markets next week, this might be one of the more likely spots for it to show. The European Central Bank has a rate decision on Thursday and it’s long been expected that the ECB will increase their stimulus program at this meeting. But there’s also considerable speculation that the bank may not have much ammunition left in the artillery, at least not enough to keep up with the breakneck pace out of the US; and this week’s price action is somewhat of a nod to that as buyers finally pushed the EUR/USD pair through a huge zone of resistance around the 1.2000 handle.
Perhaps what’s most impressive is what happened after that 1.2000 break; in the fact that EUR/USD just kept running until a fresh two-year-high was set at 1.2178. While this appears a decisive break on the technical front, the big item of concern would be whether the ECB does, in fact, have enough firepower stored up to elicit another wave of Euro weakness at next week’s rate decision.
On a purely technical basis, however, this is a bullish…
Read More: US Dollar Technical Forecast: EUR/USD, GBP/USD, AUD/USD, USD/CAD