US Dollar Price Outlook Talking Points:

  • The US Dollar has opened the week with weakness, testing the two-year-low set in mid-August.
  • Just below USD price action is another zone of potentially key support.
  • Can USD bears stage a breakout? And if so, for how long might they be able to push to fresh lows? The big driver on this week’s economic calendar appears to be on Friday with Non-Farm Payrolls; but last week’s comments from the FOMC at Jackson Hole may continue to carry pull into today’s US session.
  • Fundamentals are moving back in the spotlight with the Fedand NFP carrying some weight for this week. Learn more about each in the fundamental analysis section of our DailyFX Education section.

US Dollar Bears Make a Push to Start the Week

US Dollar bears are making a push to start this week, as a big zone of support lurks underneath US Dollar price action. Last week closed with USD weakness showing through Friday, helped along by the comments from FOMC Chair Jerome Powell to kick off the Jackson Hole Economic Symposium.

Last week produced what could end up being a large change at the world’s largest Central Bank, with the Fed now prioritizing the employment part of their dual mandate. Powell said that the bank will now target ‘average inflation’ of 2%, meaning that the FOMC could be more open to inflation overshoots in the future should the situation present itself. This also highlights how the Fed can remain on low rates for even longer as they’re a little less tied to rate hikes should inflation touch over that 2% marker.

The announcement helped to erase early-week gains in the Greenback, with the USD pushing right back towards a key spot of support that had held the lows since mid-August. This takes place around 92.15-92.50; and just below that is another area of potentially troubling support for bears which we’ll look at a little later.

US Dollar Daily Price Chart

US Dollar Daily Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

Taking a step back on the chart and that 92 area on DXY appears to be potentially problematic for bears and this may be a reason for the build of support just above that level. The 92 spot on the DXY chart has two different Fibonacci levels of interest, combined with a trendline projection that can be found by taking the 2011 and 2014 swing lows in the currency.

US Dollar Monthly Price Chart

US Dollar Monthly Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

Can USD Bears Muster the Strength?

This sets up for a challenging backdrop for USD bears – because even if/when sellers can test through the current set of lows around 92.15, there may be another, larger item of support just underneath.

This is the type of scenario that will often need some trend-side motivation to allow for that breach, and looking to this week’s economic calendar, the obvious item jumping out is this Friday’s Non-Farm Payrolls report. Also of issue is one of counterparts – if the USD is going to breakdown, which currencies are going to absorb that lost strength? Can EUR/USD break through a vaulted psychological level at 1.2000?

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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