Weekly Technical US Dollar Forecast: Finally Turning Higher?

DXY Price Index Technical Analysis: Daily Chart (Feb. 2020 to Feb. 2021) (Chart 1)

Weekly Technical US Dollar Forecast: Finally Turning Higher?

The DXY Index had been clinging onto the downtrend from the March and November 2020 highs, but was finally able to turn higher on Thursday and Friday, breaking the intramonth downtrend in the process.

Early-March will prove to be a significant psychological test for the US Dollar, as the series of lower highs and lower lows was never broken throughout February. Now, a move over the mid-February swing high of 91.06 would suggest that the turn higher is gaining legitimacy.

Momentum is turning after the abrupt rally in prices. The DXY Index is above its daily 5-, 8-, 13-, and 21-EMA envelope, which is in neither bearish nor bullish sequential order. Daily Slow Stochastics are driving higher from oversold territory, while daily MACD is starting to turn higher, albeit below its signal line. More choppiness could be ahead, which was more or less the state of affairs throughout February.

DXY Price Index Technical Analysis: Weekly Chart (Feb. 2011 to Feb. 2021) (Chart 2)

Weekly Technical US Dollar Forecast: Finally Turning Higher?

The longer-term view established in the latter half of December 2020 remains valid: “we thus view the latest development with hesitation, particularly when viewed in context of the longer-term technical damage wrought in recent months; the DXY Index remains below its multi-year uptrend, and could be working on a multi-year double top. So long as the rebound remains below 91.75, the DXY Index outlook remains bearish on a longer-term basis.”

CFTC COT US Dollar Futures Positioning (Feb. 2020 to Feb. 2021) (Chart 3)

Weekly Technical US Dollar Forecast: Finally Turning Higher?

Next, looking at positioning, according to the CFTC’s COT for the week ended Feb. 23, speculators slightly decreased their net-short US Dollar positions to 13,851 contracts, down from 14,287 contracts held in the week prior. Net-short US Dollar positioning remains near its highest levels since March 2011, when speculators held 15,494 net-short contracts. Positioning is now the least net-short since the first week of December, when speculators held 6,486 contracts.

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For full US economic data forecasts, view the DailyFX economic calendar.

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