The U.S. Dollar Index closed sharply lower last week as the Euro jumped to a 12-week high after the European Central Bank increased stimulus to shore up economies hurt by the coronavirus pandemic.
The dollar has been under pressure for the last three weeks as risk sentiment improves and stocks surge on optimism that the worst of the economic downturn from the coronavirus has passed.
Last week, June U.S. Dollar Index futures settled at 96.922, down 1.419 or -1.44%.
The greenback moved modestly higher on Friday after data showed the U.S. labor market unexpectedly improved in May, but there was no indication that this represents an early sign of a change in trend as uncertainty about the U.S. economy capped gains.
Friday’s Labor Department employment report showed economic conditions have significantly improved as businesses have begun to reopen after shuttering in mid-March to slow the spread of COVID-19.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart, but momentum has been trending lower since the formation of the closing price reversal top the week-ending March 27.
A trade through 103.960 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 94.530 will change the main trend to down. This will be confirmed by a trade through the contract low at 94.372.
The main range is 94.372 to 103.960. Its retracement zone at 98.035 to 99.165 is controlling the longer-term direction of the index. On Friday, the index closed on the weak side of this zone, making it resistance and further confirming the downside bias.
Weekly Technical Forecast
Based on the longer-term outlook, the direction of the June U.S. Dollar Index this week is likely to be determined by trader reaction to the main Fibonacci level at 98.035.
A sustained move under 98.035 will indicate the presence of sellers. If this move continues to drive the downside momentum then look for a break into an uptrending Gann angle at 96.155. We could see a technical bounce on the first test of this level. If it fails then look for the selling to extend into the next uptrending Gann angle at 95.345. This is the last potential support angle before the pair of main bottoms at 94.530 and 94.372.
Overcoming the Fibonacci level at 98.035 will signal the presence of buyers. The first target is the downtrending Gann angle at 98.460. Overtaking this angle will indicate the buying is getting stronger. This could trigger a further rally into the main 50% level at 99.167.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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