US dollar index outlook: Dollar hits new multi-year low, set for deeper fall in early 2021
US DOLLAR INDEX
The dollar hit new three-year low against the basket of major currencies on Monday, starting trading in 2021 in red, after registering drop of nearly 6.5% in the year 2020.
Covid-19 pandemic that devastated the US economy and ultra-low interest rates deflated the greenback, while rising optimism on hopes that economic recovery would accelerate after vaccines were approved, boosted appetite for riskier assets and further depressed the US currency.
Fresh negative signal was generated on yearly close below psychological 90 level that increased risk of extension towards key supports at 88.24/14 (50% retracement of 2011/2020 72.69/103.80 rally / 16 Feb 2018 low).
The double-top has formed on a monthly chart (103.80), with break of 88.24/14 pivots needed to complete the pattern and signal deeper fall.
Technical studies maintain strong bearish momentum on all larger timeframes (D/W/M), but oversold conditions warn that bears may face headwinds.
Falling weekly Tenkan-sen provides solid barrier at 91.26 (also Fibo 38.2% of 94.30/89.37 bear-leg) which should ideally cap upticks and keep bears intact.
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