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The USD is Weak

The USD Index Uptrend Is Still Alive

Posted Monday, February 25, 2019 by
Shain Vernier • 2 min read

On Tuesday and Wednesday of this week, FED Chairman Jerome Powell will make his scheduled trip to Capitol Hill. He will testify on a broad spectrum of topics, including the current state of the U.S. economy and issues facing FED policy. Powell’s testimony will consist of prepared comments and a Q&A session with members of Congress. While the prepared comments are released beforehand, the questions bring a degree of spontaneity. A surprise or two is possible, so staying abreast of developments will be a key part of successfully trading the forex over the next 48 hours. For the time being, March USD Index futures are hanging tough in bullish territory.

Today’s U.S. session has brought a vacant economic calendar. However, the U.S. treasuries auction raised some eyebrows. The 2-Year Note saw a significant plunge in yields, from 2.600% to 2.503%. This is an obvious signal that the markets are anticipating the FED’s dovish tone to extend throughout 2019.

USD Index Remains In A Technical Uptrend

A dovish FED and falling intermediate-term bond yields do not bode well for the Greenback. However, the daily uptrend for the March USD Index remains technically valid.

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

Here are a few levels to watch going into Powell’s testimony:

  • Support(1): 38% Current Wave Retracement, 96.330
  • Support(2): Bollinger MP, 96.245
  • Support(3): Daily SMA, 95.885

Overview: By looking at the daily chart, I get the feeling that a majority of participants are long this market. The rationale is interesting, as a forthcoming economic slowdown and a dovish FED typically lead to sliding rates. But, to each their own.

From a technical standpoint, one likely stop out point for those playing the long trend is last week’s low (96.120). In the event this level is challenged ahead of Powell’s testimony, look for bearish extension and a test of the Daily SMA. If not, the uptrend will remain valid and a run at 2019’s High (97.230) is likely to set up for the near future.

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