Forex Forecast: Pairs In Focus - Sunday, Sept. 20

Every morning this coming week apart from Friday, the US Federal Reserve Chairman, Jerome Powell, will be speaking, and the US Treasury Secretary, Steven Mnuchin, will be speaking on Thursday. Their comments have the potential to affect most major Forex pairs and by extension, the US Dollar Index. On Tuesday morning, the Bank of England Governor will be speaking. On Wednesday, New Zealand will be releasing its key interest rate announcement. That same day, France, Germany, and the US will be releasing their Purchasing Managers Index (PMI) numbers – the PMI is a manufacturing number that is a highly monitored indicator of a nation’s economic health. This basket of economic announcements is a great catalyst to provide liquidity and range in the Forex markets for the week of September 21.

US Dollar Index

Let’s begin this week’s outlook with the US Dollar Index.

US Dollar Index chart

 On the weekly chart, it has been bearish since May when it pushed down hard with an impulsive move of consecutive red candles, mainly the result of COVID-19 and the Federal Reserve’s subsequent response. The key support level at 94.65 was broken in July and the 61.8% level from the recent major low to major high was also firmly broken in the same month. This leaves the Dollar Index free to move down to the next support level at 88.25. That’s a long way to go.

Let’s zoom into the 4-hour picture.

DXY- 4-hour

Here we see the 61.8% level we identified on the weekly timeframe now acting as a resistance zone on the 4-hour picture. At the time of writing, the price is near the top half of the range that started in August.

 

The bottom line: the outlook for the US Dollar Index is bearish with price in a good place to consider bearish trades on either the Dollar Index or using it as a backdrop to finding bearish trades on US-based (i.e. Major) Forex pairs.

USD/JPY

Next, let’s take a look at USD/JPY, first with a weekly chart to gain context.

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