US Dollar Bullish Momentum Persists: A Look at Current Market Trends

The US Dollar is rallying amid geopolitical uncertainty
.17 Apr 2024
author avatar image Andreas Thalassinos

Table of Contents

Briefing on US Dollar Bullish Momentum Persists: A Look at Current Market Trends

  • Title: US Dollar Bullish Momentum Persists: A Look at Current Market Trends
  • Financial instrument: Dollar Index
  • Timeframe: Daily
  • Session: London
  • Trend: Up
  • Trend Confirmation: Exponential Moving Average(EMA), Moving Average Convergence/Divergence(MACD), Relative Strength Index (RSI), Momentum
  • Momentum: MACD above Signal Line
  • Divergence: Not available
  • Support Levels: 84.203, 82.906, 81.155
  • Resistance Levels: 105.12, 104.33, 102.86
  • Trading Strategy: Buy on Breakouts, Buy on Dips

The US Dollar

The US Dollar has been experiencing a bullish trend lately, with prices steadily increasing. It is well-sought after as a safe-haven asset for its versatile characteristics.

  • Global Reserve Currency: The US Dollar serves as the world’s primary reserve currency, used in international trade and finance. Its widespread acceptance and stability make it essential for conducting cross-border transactions and maintaining global economic stability.
  • Safe-Haven Asset: During times of geopolitical uncertainty, economic instability, or market turbulence, investors often seek refuge in the US Dollar. Its status as a safe-haven asset provides a hedge against volatility and serves as a store of value during periods of uncertainty.
  • Liquidity: The US Dollar is the most liquid currency in the world, with deep and highly liquid financial markets. Its liquidity facilitates efficient trading and allows investors to easily enter and exit positions with minimal price impact, making it attractive for investors seeking liquidity and flexibility.
  • Investment Opportunities: The US Dollar offers access to a wide range of investment opportunities, including US stocks, bonds, real estate, and commodities priced in USD. Investors often buy US Dollars to invest in these assets, seeking diversification, capital appreciation, and income generation.
  • Interest Rate Differentials: Central bank policies and interest rate differentials between the US and other countries influence investors’ demand for the US Dollar. Higher interest rates in the US relative to other countries can attract capital inflows as investors seek higher returns on their investments, leading to increased demand for the US Dollar.

    High Impact Economic Events

    High Impact Economic Events

    • Wednesday, 06:00 am (GMT+0): CPI y/y (GBP)
    • Thursday, 01:30 am (GMT+0): Unemployment Rate (AUD)
    • Friday, 06:00 am (GMT+0): Retail Sales m/m (GBP)

    Trend Analysis 

    The price chart of the us dollar index showing a persisting uptrend and potential support and resistance levels.

    Since March 18, the price of the US Dollar Index has been consistently rising. A technical reversal pattern called a failure swing was formed after the price bounced back from a daily low of 102.29 to a higher low of 102.35, followed by breaking the high at 103.15. The bullish trend was further confirmed as the US Dollar surpassed the dynamic support of the 50-period Moving Average and reached a high of 106.32.

    These recent developments indicate a positive market sentiment towards the US Dollar, which may lead to further upward momentum. However, it is important to note that the bullish trend may experience a correction in the near future.

    Overall, the trend analysis suggests that the Dollar is currently in a bullish momentum, but a cautious approach should be taken due to the potential for correction.

    Indicators and Oscillators Analysis

    According to the Relative Strength Index (RSI), the Dollar is currently on an upward trend, as it is hovering above its 70 level. However, traders should exercise caution as the RSI may not be a reliable indicator on its own. The Bollinger Bands suggest that volatility is widening, with the Upper and Lower Bands diverging and prices trending along the Upper Band. This indicates that the uptrend is likely to continue. The Middle Band provides immediate support in case of any potential downside correction. The Exponential Moving Average and the Moving Average Convergence/Divergence (MACD) both confirm the upward movement. Prices are trading above the Moving Average line, and the MACD is above the zero baseline. The Stochastics crossed the overbought zone, above 80, indicating a bullish momentum. Additionally, the MACD oscillator shows a bullish momentum, with the MACD above the Signal line.

    Key Support Levels 

    In the current market, the safe-haven currency is under the control of the bulls, and the price of the US Dollar is expected to continue its upward trend. The Dollar’s first support level is at 84.203. If the price drops further, it may break this level and trigger the next support level at 82.906. If this level is breached, it could indicate the potential for a further downturn, and the next significant support level, estimated to be 81.155, may come into play. It is crucial to closely monitor these support levels to determine the future direction of the Dollar.

    • S1–> 84.203
    • S2–>82.906
    • S3–>81.155

    Traders and investors should pay close attention to these levels as they can provide valuable insights into the future price trends of the US Dollar Index.

    Key Resistance Levels 

    If the market is controlled by the bulls, there may be potential gains in the future. However, resistance is expected to arise at various levels. The initial resistance level is estimated to be around 105.12, followed by resistance levels at 104.33 and 102.86, respectively. These levels of resistance could pose a challenge to the market’s upward momentum. Nonetheless, traders can navigate these obstacles and mitigate risks with careful consideration of market trends and strict risk management tools. The resistance levels, R1, R2, and R3, are projected to be significant barriers to the market’s upward movement.

    • R1–>105.12
    • R2–>104.33
    • R3–>102.86

    Traders should closely monitor the market trends and be prepared for potential resistance at these levels. By utilizing appropriate risk management strategies and keeping a close eye on market trends, traders can make informed decisions and potentially capitalize on market movements.

    Trading Strategy 

    Traders who follow technical analysis may want to consider increasing their positions in the US Dollar if the price goes beyond the recent high of 106.32, which was recorded on April 16. Those who are inclined towards aggressive trading can look for short-term buying opportunities whenever the price falls toward the support levels and the Middle Band. It is essential to keep the stop-loss orders tight to manage the risks effectively. If the bullish trend continues, and the candlesticks keep closing above the Upper Bollinger Band, it indicates that the uptrend will persist, and traders can benefit from the rising prices by opening long positions.

    Conclusion

    Based on the technical analysis, the outlook for the US Dollar Index appears bullish, with a possible short-term correction to the downside. 

    Overall, investors want to buy the US Dollar for its role as a global reserve currency, its status as a safe-haven asset during times of uncertainty, its liquidity, access to investment opportunities, and potential returns driven by interest rate differentials.

    Traders should closely monitor price action around critical support and resistance zones and relevant technical indicators to identify potential trading opportunities and manage risk effectively in the current market environment.

    author avatar image
    Andreas Thalassinos

    Experienced educator with a demonstrated history of working in the financial services industry. Skilled in Technical Analysis, Market Risk, Asset Management, Stock Market, and Trading Systems. Strong professional with a MSTA by Society of Technical Analysts (UK), CFTe and MFTA focused in Master of Financial Technical Analysis from International Federation of Technical Analysts (USA).