Last year, the US inflation rate was at a 40-year peak while posting the lowest unemployment rate in several decades. The FOMC board has conversely tackled the inflation rates by adopting hawkish policies and increasing interest rates. Today’s analysis will examine how the Dollar performs ahead of the ISM Manufacturing PMI release.
US Dollar – DXY
Here on the daily timeframe of the DXY, the price can be seen already reacting to the rally-base-drop supply zone. The 88% of the Fibonacci retracement and the 100-Day moving average were an added confluence for the bearish sentiment. Based on this analysis, we can expect bullish price action from the XXX-USD pairs.
USDCAD
USDCAD has bumped into the supply zone following the bearish structure break at the highlighted horizontal arrows. The 50-Day moving average locates below the 100-Day moving average, indicating a bearish sentiment. The trendline resistance is the third signal for a bearish price movement.
Analysts’ Expectations:
- Direction: Bearish
- Target: 1.32800
- Invalidation: 1.36400
USDJPY
We can see price stalling near the rally-base-drop supply zone in line with the bias formed from the DXY chart. There is also a confluence of factors that indicate a possible bearish sentiment, including the crossing of the 100 and 200 Day moving averages, the 88% Fibonacci retracement level, and the resistance from the two moving averages.
Analysts’ Expectations:
- Direction: Bearish
- Target: 130
- Invalidation: 138.2
USDCHF
As I noticed above, a weakness in DXY will lead to a bearish reaction on charts of currency pairs with the USD as its Base currency. From a technical standpoint, based on the Daily timeframe of USDCHF, I expect to see some bearish movement based on the confluence of the rally-base-drop supply zone, the 100-Day moving average resistance, and the 88% Fibonacci retracement.
Analysts’ Expectations:
- Direction: Bearish
- Target: 0.91100
- Invalidation: 0.94845
CONCLUSION
The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.
