The U.S. Dollar plunged against a basket of major currencies on Tuesday as the end-of-the-year liquidation continued. Investors have been dumping the greenback since the U.S. and China agreed to Phase 1 of its trade deal on December 13.
After hedge buying drove the dollar higher most of the year as protection against an escalation of the trade war, investors began to dump the greenback as it lost its appeal as a safe-haven asset. Meanwhile, optimism over stronger global economic growth drove Forex investors into higher risk, higher-yielding currencies.
On Tuesday, the March U.S. Dollar Index settled at 96.058, down 0.349 or -0.36%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Tuesday when sellers took out the last main bottom at 96.295. The nearest main top is 97.405. The main trend will change to up on a trade through this top.
The long-term range is 94.665 to 98.735. Its retracement zone is 96.700 to 96.220. This zone had been providing support since mid-October. Crossing to the weak side of this range has put the dollar index in a bearish position.
A sustained move under the Fibonacci level at 96.220 will put the index in a bearish position. This could trigger an acceleration into a pair of main bottoms at 95.539 and 95.509. If sellers can take out this area then look for the down move to possibly extend into the late June bottom at 94.665.
A short-covering rally could drive the March U.S. Dollar Index back inside the 96.220 to 96.700 retracement zone, but new short-sellers could come in on a test of this area.
Overcoming 96.700 will be the first sign of strong buying. However, don’t expect a prolonged rally to develop unless we start to see higher-bottoms and higher-tops develop.
This article was originally posted on FX Empire
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