DXY: US$ Index still looking heavy. More pain for the dollar? by FX Charts Daily

 The DXY again turned sharply lower last week, where after a brief squeeze up to 97.28 on Monday it then dived to a low of 94.39 on Thursday before closing Friday at 95.21.The momentum indicators, (as per the charts, below) still look negative and it would seem that for the time being the dollar is going to remain under pressure for a while to come, particularly against the Euro (which makes up 57.6% of the DXY basket), although it has made some good gains in the last couple of sessions against Cable (11.9%) and the Yen (13.6%)

In bottoming out at 94.39, the Index held the strong support at 94.33 (38.2% of 84.47/100/39) which will again provide the main base in the coming days, although the 100 DMA lies at 94.78 and will provide interim support. Below 94.39 though would hint at a run towards 94.00 and then to the 3 Feb low at 93.25 and to the next support at 92.45 (50%% of 84.47/100/39). This lies just ahead of the major Fibo level at 92.20 (38.2% of 78.90/100.39) and should be very strong, if we get there.

The topside will now see nearby sellers at the breakdown level at 95.80, above which would head back towards 96.17 (26 March low) and on to the Fibo resistances which will arrive at 96.53 (38.2% of 99.98/94.39) and at 97.15 (50%). Further out 98.67 (76.4%) and 99.99 (100%) will provide levels to watch ahead of 100.00.

Although looking somewhat distant right now, targets beyond 100 remain unchanged at 100.39 (13 Mar high) and at 101.77 (61.8% of 121.02/70.69) a break of which would head towards the March 2003 high at 102.15. In the longer term the Jan 2003 high at 103.20 would come into view but right now looks as though it will take a while to get there.

To repeat what we said last week, the bigger picture outlook remains unchanged in that that the lower price action from the 100.39 trend high is seen as part of a larger consolidation pattern and we could yet see another run towards 94.30, which could be seen as the third leg of a corrective leg lower. In the longer term though, the dollar’s up trend is expected to resume, eventually back to and well beyond the current peak at 100.39..