US Dollar Technical Outlook as Trump, FOMC Drive the Flow


US Dollar Technical Outlook Talking Points:

  • The US Dollar has retained strength through much of Q3 despite an increasingly dovish Federal Reserve.
  • Friday of this week brought a number of drivers into the fray and the US Dollar sell-off took out more than a week of gains. Can that sell-off continue into next week with a number of high-impact US data releases are on the economic calendar.

US Dollar Technical Outlook: Bearish

It was a busy week in the US Dollar and with the Jackson Hole Economic Symposium on this week’s calendar, that was somewhat to be expected. What wasn’t expected, however, was another ramping up of the US-China trade war that further puts the FOMC into a corner regarding monetary policy. While Thursday brought a chorus of Fed-speak that wasn’t so dovish, helping the US Dollar firm-up to a key zone of resistance, the Friday outlay of drivers was considerably different.

The morning started early with a surprise announcement from China on more tariffs to be levied on American exports. This was followed by a softening in FOMC Chair Jerome Powell’s statement at Jackson Hole, where he noted that the bank will do what is needed to keep the expansion on track. And that was followed by a series of remarks by President Trump over Twitter indicating that additional retaliation from the United States would take place in due time, helping to push-lower both the US Dollar and US equities.

Friday price action in the Greenback has pushed the currency down to fresh weekly lows after a continued grind at resistance through this week.

US Dollar Daily Price Chart

US Dollar Daily Price Chart

Chart prepared by James Stanley; US Dollar on Tradingview

Taking a step back on the US Dollar chart and price action remains in a rising wedge pattern. It’s almost as if the currency has been in a begrudgingly bullish state since early-July as the Fed has been attempting to strike a tone of stability. Case in point, the rate cut at the end of last month led to a quick burst of strength in the currency to fresh two-year-highs, and this was likely because Chair Powell refused to commit to any future cuts while posing that 25 basis point move as a ‘mid cycle adjustment.’ But that was all quickly offset when President Trump announced an additional round of tariffs on China, and prices in USD quickly reverted back into the prior range.

US Dollar Weekly Price Chart

US Dollar Weekly Price Chart

Chart prepared by James Stanley; US Dollar on Tradingview

On a shorter-term basis, pressure in the Greenback has begun to show again after the combination of Friday drivers, helping DXY to push down to a fresh weekly low. This reignition of the short-term trend in the direction of that longer-term potential reversal keeps the door open for bearish scenarios in the Greenback in the week ahead and, as such, the technical forecast will be set to bearish for the US currency.

US Dollar Hourly Price Chart

US Dollar Technical Outlook as Trump, FOMC Drive the Flow

Chart prepared by James Stanley; US Dollar on Tradingview

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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