USD Price Outlook: US Dollar Oscillates In Effort To Form Support

The US Dollar endured a turbulent trading session Wednesday as early weakness morphed into strength. US Dollar bears made a push to start the week as GBP/USD price action popped on the back of UK-EU negotiators opting to extend Brexit negotiations, which largely contributed to the initial 0.63% decline notched by the DXY Index. It is likely this weighed negatively on the US Dollar more broadly and helped fuel a risk-on tone across markets. Also, the first round of coronavirus vaccine doses officially being dished out could have fostered upbeat market sentiment and exacerbated downward pressure on safe-haven currencies such as the US Dollar.


DXY Index Price Chart US Dollar Technical Forecast

Chart by @RichDvorakFX created using TradingView

That said, market optimism turned less sanguine as short-term risks that stem from mounting coronavirus lockdown measures doused broader vaccine hope with cold water. London announced its strictest tier 3 lockdown protocol and also communicated information about a new variant of the virus ‘growing at a faster pace.’ Germany revealed nonessential businesses are to close as of Wednesday with the Netherlands set to enter a full nationwide lockdown as well. New York Mayor Bill de Blasio conveyed a need to prepare for the possibility of another full shutdown.

These developments fueled the deterioration in market sentiment and helped drive the bid beneath USD price action as trading progressed throughout the session. On that note, the US Dollar Index printed a bullish engulfing candlestick on a 4-hour chart after another test of technical support around the 90.55-price level. Further, the MACD indicator suggests bearish momentum has started to wane. A topside break above technical resistance highlighted on the chart above could open up the door for bulls to target the monthly opening level around the 92.00-mark. Conversely, breaching the highlighted technical support level might motivate US Dollar bears to make a heartier push beneath the 90.00-handle with 2018 lows on the radar.

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