Dollar Index: Sharply Higher Despite Disappointing U.S. Retail Sales

Topic [Show]

DXY continued its rebound and posted a 0.75 percent gain to 90.77 in the last five trading days. Briefly blocked by the dovish statement of Fed chairman Jerome Powell, the U.S. Dollar went positive against a string of other major currencies until the close of trading at the weekend. The release of U.S. Retail Sales data that showed below-expectation results on Friday (January 15th) was unable to prevent the USD from extending its rebound from 2018 lows.

DXY In Weekly Charts

The falling Wedge (FW) track formed from March 2020 to January 2021 is still intact so far. Efforts to move higher towards the downtrend line or resistance trendline that limits DXY upswing since March last year are also starting to be seen.

In the above scenario, the level of 92.00 becomes crucial in the medium term. Penetrating and accelerating above that level can confirm the FW chart pattern, further targeting the MA-30 curve (now at 93.00) and threatening the resistance zone of 94.30/94.74 (High November/September 2020).

DXY In Daily Charts

In the short term, the bullish divergence of the RSI indicator and the Morning Star candle pattern detected last week have shown its performance. However, DXY's upswing has not gone smoothly in the last five trading days, although the Three White Soldiers were identified earlier in the week.

The closing of the Daily candlestick above the MA-30 (now at 90.27) supports the Weekly scenario to continue upswing to the 92.00 level. This condition is also supported by the movement of the RSI indicator which is now pointing-up above the balance level.

But what will probably be a problem for the bullish USD is the USD sell or bearish action response as the RSI heads into overbought territory. This is considering that DXY time frame Weekly is still moving below the MA-30 curve since June 2020, indicating negative bias in the medium term.