USD Index Gives Back Early Gains

Posted Thursday, February 7, 2019 by
Shain Vernier • 2 min read

In what has been a relatively event-free U.S. session, the USD is in the process of giving back early gains. The March USD Index daily chart is a good illustration of the big picture, with rates falling from intrasession highs (96.455) but holding firm above the 96.000 psychological level. Values remain moderately positive and the USD Index still has a chance to extend its winning streak to six.

The broader picture for the U.S. markets isn’t so rosy. The indices are being pounded following comments from White House advisor Larry Kudlow regarding the ongoing U.S./China trade war. Kudlow stated that there is a “sizeable distance” between the two sides, suggesting that a resolution to the ongoing standoff may not come anytime soon.

Markets have been hit hard. The DJIA is off more than 350 points, followed by the S&P 500 SPX (-40) and Nasdaq (-125). For the time being, risk is being taken off of the table en masse.

March USD Index Futures Test Swing High

In a Live Market Update from yesterday, I outlined topside resistance at the daily Swing High (96.375). This level has withstood a formidable challenge, setting up a potential shorting opportunity in the March USD Index.

March USD Index Futures (DX), Daily Chart
March USD Index Futures (DX), Daily Chart

Here are the levels to watch until the end-of-week:

  • Resistance (1): Double Top, 96.375-96.455
  • Support(1): Bollinger MP, 95.710

Bottom Line: With no primary market movers scheduled for the U.S. Friday session, it may turn out to be a quiet end to the trading week. However, a short from beneath today’s low isn’t a bad way to play the USD Index going into the two-day break.

Until Friday’s closing bell, I will have sells queued up from 96.150 in the March USD Index. With a stop above the Double-Top formation at 96.505, this trade produces 60 ticks on a test beneath the 96.000 handle.

For the intermediate-term, the fundamentals facing the USD are bearish. A passive FED and a forthcoming slump in U.S. GDP are on the minds of traders around the world. The Double Top formation in the USD Index is a pretty good place to make a stand to the short side of this market.

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