Important decision making area on the dollar Index
Daily Chart – Dollar Index 27/03/2020 06:00am

Essential Insights

The dollar index fell from a high of 103.00 as the Federal Reserve announced new rounds of monetary support and as a $2 trillion U.S. fiscal stimulus package was announced.

Technicals

The DXY (dollar index) has declined 2% this week, though remains 7% up from its low on March 9th.

The price was not able to break through the previous December 2016 yearly high at 103.80 however, there is certainly scope for the price to revisit this level. It is currently trading at a key support level of 100.20, below this level prices have generally fallen back to 94.00.

Price is currently trading above the 14 – day EMA, the previous daily candle closed as a bearish engulfing candle however remains around the key 100.20 support. It is recommended that traders wait until this support has been retested.

Fundamentals

On Monday, the U.S. Federal Reserve announced further Quantitative Easing (QE) would be carried out to stimulate and support the economy in addition to a $2 trillion fiscal package. Quantitative Easing allows the FED to produce essentially unlimited quantities of U.S. dollars, which is providing downward pressure on the value of the US dollar.

Hints that Trump wants businesses and operations to re-open soon have supported expectations of the $2 Trillion U.S. fiscal package being passed, which has also weighed on dollar strength.

That being said, the dollar weakness we have witnessed is likely to be unsustainable until we have visibility on when the economy can re-open, and this should be data-driven through key macro-economic metrics such as retail sales and consumer/business confidence.