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US Dollar Technical Analysis: USD Pulls Back as EUR/USD Bounce Continues

Article By: ,  Sr. Strategist
October 24, 2024 4:51 PM

US Dollar Talking Points:

It’s been a massive push so far in Q4 and the US Dollar has quickly pushed into overbought territory on the daily as EUR/USD has made a fast move into oversold. As I had looked at yesterday, 17 of the past 19 days in EUR/USD have been red; but finally, some element of support began to show at a confluent spot on the chart, around the 1.0765 Fibonacci level that was aligned with the bullish trendline originating from last year’s low.

Given the heavy 57.6% allocation of the Euro in the DXY quote, there’s often an inverse relationship playing through the two markets and as that EUR/USD bounce has extended past the 1.0800 handle, DXY has started to pullback.

 

US Dollar Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

 

US Dollar Support Potential

 

It’s been a stark change-of-pace from the Q3 sell-off in the USD has the currency has quickly retraced more than 61.8% of the 2024 bearish move. There’s only been mild pullbacks along the way, such as the bearish move last Friday after the first re-test of the 200-day moving average, or the stalling shown at 102.55 after the NFP breakout.

The 23.6% retracement of the rally is all the way down around 103.53, which is a confluent area as there’s quite a few support elements just below that and perhaps coincidentally, it’s the 103.32-103.46 support zone just below that which held the lows after that pullback from the 200-dma. That was support last Friday which held through this week’s open before buyers were able to quickly push up to fresh highs.

But again, the grinding move-higher over the past couple weeks has afforded a number of possible swing areas, and depending on how aggressive bulls remain to be, there could be a case for support around the 104-104.07 area on DXY, and the 103.82 level below is a prior price swing that’s now confluent with the 200-day moving average. In the event of a deeper sell-off, the 102.88-103.03 area is of interest, with that former price functioning as the 38.2% retracement of the Q4 rally.

On the resistance side, it was the 104.50 level that stymied buyers yesterday and above that, there’s quite a bit going on around the 105.00 psychological level, with some nearby Fibonacci retracements. For shorter-term resistance, the 104.38 Fibonacci level helped to hold a short-term lower-high this morning, and that would be the price that I would look for buyers to take out to exhibit a regaining of control in DXY.

 

US Dollar Two-Hour Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

--- written by James Stanley, Senior Strategist

 

US Dollar Talking Points:

It’s been a massive push so far in Q4 and the US Dollar has quickly pushed into overbought territory on the daily as EUR/USD has made a fast move into oversold. As I had looked at yesterday, 17 of the past 19 days in EUR/USD have been red; but finally, some element of support began to show at a confluent spot on the chart, around the 1.0765 Fibonacci level that was aligned with the bullish trendline originating from last year’s low.

Given the heavy 57.6% allocation of the Euro in the DXY quote, there’s often an inverse relationship playing through the two markets and as that EUR/USD bounce has extended past the 1.0800 handle, DXY has started to pullback.

 

US Dollar Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

 

US Dollar Support Potential

 

It’s been a stark change-of-pace from the Q3 sell-off in the USD has the currency has quickly retraced more than 61.8% of the 2024 bearish move. There’s only been mild pullbacks along the way, such as the bearish move last Friday after the first re-test of the 200-day moving average, or the stalling shown at 102.55 after the NFP breakout.

The 23.6% retracement of the rally is all the way down around 103.53, which is a confluent area as there’s quite a few support elements just below that and perhaps coincidentally, it’s the 103.32-103.46 support zone just below that which held the lows after that pullback from the 200-dma. That was support last Friday which held through this week’s open before buyers were able to quickly push up to fresh highs.

But again, the grinding move-higher over the past couple weeks has afforded a number of possible swing areas, and depending on how aggressive bulls remain to be, there could be a case for support around the 104-104.07 area on DXY, and the 103.82 level below is a prior price swing that’s now confluent with the 200-day moving average. In the event of a deeper sell-off, the 102.88-103.03 area is of interest, with that former price functioning as the 38.2% retracement of the Q4 rally.

On the resistance side, it was the 104.50 level that stymied buyers yesterday and above that, there’s quite a bit going on around the 105.00 psychological level, with some nearby Fibonacci retracements. For shorter-term resistance, the 104.38 Fibonacci level helped to hold a short-term lower-high this morning, and that would be the price that I would look for buyers to take out to exhibit a regaining of control in DXY.

 

US Dollar Two-Hour Price Chart

Chart prepared by James Stanley; data derived from Tradingview

 

--- written by James Stanley, Senior Strategist

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

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