News & Analysis

COTD: US DOLLAR INDEX – A Potential Risk-reward Setup For DXY Bulls?

September 3, 2020
DXY – Monthly


Sometimes it is the simplest of charts that turn out to be the most rewarding in terms of key market analysis, and in today’s Chart of The Day, we’ve found the Dollar Index (DXY) on the monthly time-frame to be a perfect example of this idea.

All we are focussing on is this validated bullish trend line that originated back in May 2011 and how price action may respond to not only this potential area of support but the combined levels of supply and demand driving the appetite for the US Dollar.

At the current price of 92.80, the DXY is teetering on the edge of this trendline and appears to be holding as support for the time being. Note although price action dipped below the trendline under 92.00 during recent sessions, technically, we will need to see out the remainder of September to see if sellers can close beneath here or not.

Those traders bullish on the Dollar may see this as a reasonable risk-reward opportunity should the price action maintain this longer-term trend and resume an upward trajectory.

If we take a quick look at the same chart, but in point and figure form pictured below, there seem to be large disparities between the main areas of supply and demand. To the upside, the initial target would be 102.00. However, beyond this level is void of sizable resistance until we reach previous highs around the 120.00 regions.

Similarly we see the same issue to the downside with likely support at 92.00 but further down, nothing obvious until the 80.00 level. It’s clear the Dollar Index has approached a historic moment in time and could be in for a big move either way longer-term.

With US elections right around the corner and global commodity prices gathering pace, these fundamental drivers may provide the spark to ignite such a massive move and thoroughly test this trendline’s strength.


Note: Click on charts to enlarge.


By Adam Taylor CTEe


Sources: Go Markets, Meta Trader 5, TradingView, Bloomberg

Disclaimer: The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.


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