USD Index Breaks Above Weekly Resistance

It’s been a wild day on Wall Street with stocks trading in a whipsaw fashion. With only a few hours to go in the U.S. session, the DJIA DOW (+2.02%), S&P 500 SPX (+0.95%), and NASDAQ (-0.49%) are mixed. In addition, USD Index futures have broken into bullish territory, up 0.32% on the day. At this hour, the divergence between the DOW and S&P 500 with the NASDAQ is eyebrow-raising.

During the early hours of the U.S. Monday session, there were several peripheral economic metrics released to the public. Here’s a quick look at the highlights:

Event                                                                        Actual              Projected            Previous

Wholesale Inventories (MoM, Jan.)                        1.3%                   NA                          1.3%

Wholesale Trade Sales (MoM, Jan.)                       4.9%                   1.4%                        1.9%

The key takeaway from this group of figures is the jump in Wholesale Sales of 4.9%. This is a big move forward and has contributed to the lowest inventories-to-sales ratio since 2014. This suggests that consumption is solid while production isn’t what it was pre-COVID-19.

For USD Index bulls, 2021 has been a welcome reprieve. Values are well off yearly lows (just above 89.000) and driving toward 92.000.

USD Index Breaks Above Weekly Resistance

Below is a weekly chart for March USD Index futures as of last Friday’s close. Rates settled above the Bollinger MP and Weekly SMA ― an event that hasn’t occurred since last spring’s COVID-19 panic.

Overview: For the time being, a bullish bias is warranted toward the USD Index. Although the long-term downtrend remains valid, rates have broken into intermediate-term positive territory. If the Fed decides to change its tone at the March or April meeting, 2021 may pan out to be a strong year of recovery for the Greenback.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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