USD Snaps Back, Will Buyers Bid Support?

US Dollar Price Analysis

  • US Dollar price action has put in a stark change-of-pace over the past week.
  • After a 3.7% gain in 2020 and a 2.7% gain through the first few weeks of February, DXY has given up 1.37% over the past week.
  • Despite this recent momentum shift, the US Dollar is approaching a key zone of potential support. But will buyers show up to hold the lows?

US Dollar – Bears Pounce After Fresh Three-Year-Highs

It was a one-way show in the US Dollar through the first few weeks of February, and a similar statement can be made regarding the USD trend through 2020 trade. This came in stark contrast to the Q4 sell-off/bearish reversal as DXY price action fell through the bottom of a rising wedge formation.

But, after long-term Fibonacci support came in to help hold the lows through the New Year open; what started as a pullback soon turned into a fresh trend and US Dollar bulls continued to press through the first three weeks of February. This ran all the way up to the fresh three-year-high set last Thursday; but since then another stark change-of-pace has developed as the US Dollar has given back more than half of the February rally.

US Dollar Four-Hour Price Chart

USD on Tradingview

On a longer-term basis, a number of items remain of interest, key of which is a brewing evening star formation on the weekly chart. The current weekly bar is not yet completed so the formation isn’t yet set; but given the confluence of this potential formation with resistance taken from the underside of a bullish trend-line, there could be scope for further losses in the currency as the door opens into March.

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US Dollar Weekly Price Chart

US Dollar Weekly Price Chart

USD on Tradingview

On a near-term basis, the US Dollar has already shredded through some key support areas; and lurking below are a couple of other areas of interest as taken from prior resistance swings. The zone that runs from 98.33-98.50 is of particular interest, and is very nearby current price action: This area helped to hold the highs in April and May of last year, coming back into play to hold resistance again through a couple of different tests in November before sellers posed the push down to fresh five-month-lows.

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Another zone of interest sits just a little lower on the chart, plotted around the 97.70 level in DXY that had previously functioned as the yearly-high, holding buyers at bay through three separate tests in November and December of 2018, and again in March of 2019.

US Dollar Daily Price Chart

US Dollar Daily Price Chart

USD on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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