- On Wednesday evening, the dollar index fell to 103.65, forming a new July low.
Graphical analysis of the dollar index
On Wednesday evening, the dollar index fell to 103.65, marking a new July low. After consolidation on Thursday morning, a recovery started and it moved back above the 104.00 level. During the Asian session this morning, the dollar continued to rise and is now trading at 104.35. We are about to test the EMA 200 moving average, which is located at 104.40.
For now, let's not predict how the index will behave on contact with the 200 EMA. If we see a push above it, it will give the dollar a tailwind to continue its growth on the bullish side. The higher potential targets are the levels of 104.50 and 104.60. Upon crossing above 104.50, we are going for a new weekly high.
The dollar is swinging towards the bullish side, is there any strength to break above the 200 EMA?
For a bearish option, we need the beginning of a bearish consolidation and a pullback of the dollar below the level of 104.20. It is a signal that we do not have the strength to overcome the EMA 200 and a larger pullback will follow. Upon falling below 104.00, the index falls below the weekly opening price to the downside. Such a scenario strengthens the bearish momentum and will influence the dollar to continue falling. Possible lower targets are the levels of 103.90 and 103.80.
While today's economic news may not have a significant impact on the dollar index, it is important to keep an eye on the coming week, which will be dominated by news from the US market. Despite its relatively low volume, these news will certainly influence the index. Of particular note is the Bank of Canada's decision on its interest rate for next week.
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