US Dollar Weekly Technical Outlook: Big Test of Resistance Nearing
US Dollar Technical Highlights:
- Top of wedge in for a test
- Watch how market responds at resistance
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Top of USD wedge in for a test
The US Dollar Index (DXY) finally broke free a little on Thursday, if you can call it that with volatility so low, pushing on towards the top of the longer-term wedge formation. Now, with the prospect of a move into the 9770 area, can buyers drive it through or will we see another turn back down?
The current lackluster environment suggests more of the same lies ahead, that is a failure at resistance and for the broad ascending wedge pattern to continue the maturation process in the weeks ahead. A turnabout near resistance will again spin the near-term trading bias to the downside as more tightening in the range unfolds.
If, however, a clean breakout can sustain itself above the resistance in place since November, then we could be in for a material move higher as the DXY finds itself trading in open space. Where it could rise to is difficult to say just yet, but given the overall length of time price has stayed constrained it could be substantial.
The days ahead could hold an important pass or fail proposition. If a failure develops and the short-term bias turns negative again it will mean more of the same and possibly further tightening of trading conditions. And while this may indeed be so, pulling back to the big picture this may turn out to be the best scenario as the wedge formation gathers more power through a continued coiling of price action…
Check out the IG Client Sentiment page to find out how changes in positioning in major markets could signal the next price move.
DXY Daily Chart (Top of wedge coming into play…)
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—Written by Paul Robinson, Market Analyst
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Other Weekly Technical Forecast:
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Australian Dollar Forecast: AUD/USD and EUR/AUD May Be at Turning Points, Facing Trend Lines