The US dollar jumped against a currency basket on Friday amid better-than-expected US economic data, a plunge into the euro and repatriation of dollars tied to foreign investment.
In the US, consumer spending increased steadily in July as households purchased a number of goods and services. The Department of Commerce said Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month after an unregistered 0.3% gain in June. Reuters polled by economists predicted consumer spending rose 0.5% last month.
The euro, which represents 57% of the value of the dollar index, reached its weakest level since May 2017. Some say it was related to the position at the end of the month – quadrature. Others said worries the European Central Bank would cut the base rate and announce a new round of quantitative easing at its September 1
Finally, US investors are looking for better returns and trying to avoid risks in other countries by returning money back to the United States, which helps increase demand for the dollar.
On Friday, September, US dollar index futures were up 98.860, up 0.405 or + 0.41%.
Technical Analysis of the Daily Swing Chart
The main trend is up according to the daily swing chart. The upward trend was reaffirmed when buyers pulled out the main peak on August 1 at 98,700.
The new base is 97,370. The main trend will change downward if buyers pull that bottom.
If the swing from 97.370 to 98.970 forms a range, then its correction area from 98.170 to 97.980 will become the main target for the downgrade.
Daily Swing Technical Forecast
The direction of the September USD index on Monday is likely to be determined by the trader's response to Friday's high at 98,970. Volume may be extremely low on Monday due to a US vacation.
Continued movement over 98 970 will show the presence of buyers. If this move continues to generate strong upward momentum, the index will approach the main peak on January 3, 2017 at 100,055.
The index will be supported most by a weaker euro.
A continuous move below 98.970 will signal the presence of sellers. The first potential downside target is the lowest on Friday – 98,345. Adopting this low will make 98,970 a new minor peak. This could lead to further weakness in the minor correction area at 98.170 to 97.980.
Traders also need to keep an eye on closing price reversals. Subtracting 98,970 and then turning lower for the session will put the index in a position to form a potentially bearish return on the closing price. This can trigger the onset of a 2 to 3 day trend correction.