Has Three Year Dollar Advance Ended?

July 21st, 2013
in contributors, forex

Dollar Index Technical Analysis (Week of July 22nd): DXY Update

by Nick Simpson, Forex-FX-4X

  • The dollar continues to trade just under the weekly timeframe bearish engulfing candle, as highlighted in last weeks DXY technical update. The US dollar had reached a three-year high versus a basket of currencies prior to the key reversal day and was trading just under the 0.764 Fibonacci level.
  • The DXY has subsequently seen a period of consolidation this week after the sharp corrective move associated with this longer timeframe bearish candle. Nonetheless, there has been a lower close on the weekly basis as can be seen on the following chart DXY W1 chart.

Follow up:

Bearish engulfing candle – DXY

  • The U.S. dollar pulled back against other currency majors on Friday as the Group of 20 summit takes place in Moscow and prior to the upcoming upper-house elections in Japan. The Japanese yen had lost ground in recent days with the USDJPY pair seeing a break above a triangle pattern formation (see our recent USDJPY analysis). The key EURUSD pair meanwhile rose to $1.3139 from $1.3110 late on Thursday – but is still caught within the 1.3000 – 1.3200 range.
  • Data released on Friday from the CFTC (Commodity Futures Trading Commission) revealed that currency speculators increased bullish wagers in favor of the U.S. dollar to the highest seen in six weeks. The net long dollar position had risen to $29.61 billion for the week ending July 16th, compared with  $27.94 billion seen on the prior week.

DXY Technical Levels – Weekly Chart

  • In terms of the prominent DXY technical levels - we still note that near term key support has been seen around the 81.40 area. This area therefore remains as a technical point of interest should price see a sustained corrective move lower.
  • Further to this is the 80.49 area (19/6/13 swing low), the 80.00 round number and then the major previous support zone circa 78.60 – 79.00.
  • Key prior resistance has been seen at the 84.50 – 85.00 DXY zone. Any continuation of the longer term bullish trend would need to contend with potential selling interest in this area. This area marks a three-year high, the 85.00 round number and the 0.764 Fibonacci retrace.  What happens here will answer the headline question.

DXY – Weekly Chart

Click to enlarge

DXY – Daily Chart

Click to enlarge

Read also:

EURUSD Technical Analysis – Week Of July 22nd – Chart Update

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