Market Analysis

U.S Dollar index shows signs of upside price exhaustion

The U.S Dollar index has been reversing sharply lower since hitting a two-year price peak earlier this week, following the much weaker than expected ISM manufacturing headline number from the United States economy. The greenback has been coming under pressure as traders and investors increase bearish bets that the Federal Reserve will cut rates later this month.

The weaker than expected ISM data, which showed the United States manufacturing sector contracting for the first time since 2016 last month, is helping to perpetuate the notion that the U.S economy may have peaked. Furthermore, the ISM survey showed a notable decrease in business confidence inside the American economy.

The greenback has been on an unstoppable run higher since late August, with the U.S Dollar seemingly the main beneficiary of economic weakness in the eurozone and other G7 nations. Should we see United States economic growth prospects slowing as the ISM survey suggested, the U.S Dollar may have put-in an important price top this week.

Tomorrow’s U.S monthly job report will be vital for the U.S Dollar, a better than expected number may help the greenback gain back some composure over the short-term. A worse than expected headline number may have many economists noting that the U.S economy has peaked after a decade long expansion.

It is certainly fair to suggest that the American economy is in the late-cycle stages, given that most economic booms rarely last more ten-years or more and the rest of the global economy is experiencing a slowdown.


 EUR/USD Daily Mountain Chart |Source:ActivTrader

EUR/USD Daily Mountain Chart | Source: ActivTrader

The euro currency has reclaimed the 1.1000 level against the U.S Dollar after bouncing sharply from major technical support on the daily time frame. The daily time frame clearly shows that the EUR/USD pair is trapped within a falling price channel, which could see bulls forcing price towards the 1.1300 level if the ECB fails to deliver next week.


Written by Nathan Batchelor, External Analyst, ActivTrades

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