With both the US and Canada out on a bank holiday, we’re seeing a relatively quiet session in the FX market. As the chart below shows, the dollar index is falling for its third consecutive day after a rally through the first seven days of the month.

Year to date, the dollar index has formed a minor higher high and higher low, suggesting that the long-term uptrend may be resuming after the December swoon. There are still potential longer-term concerns about the greenback’s rally, but the shorter-term momentum is pointing higher for now.

For this week, the key level to watch will be previous-resistance-turned-support around 96.65. If that near-term floor is broken, bears may look to push the pair down toward the Fibonacci retracements of this month’s rally at 96.27 (50%), 96.00 (61.8%), and 78.6% (95.63). Meanwhile, the key resistance level to watch will be the peak of Friday’s bearish engulfing candle at 97.37; if buyers are able to overcome last week’s peak, the dollar index could be testing its 20-month high at 97.70 this time next week.

(Click on image to enlarge)

Source: TradingView, FOREX.com