The US dollar rose high against a basket of currencies on Friday on the back of better-than-expected US economic data, a fall in the euro and the fall of dollars tied in foreign investment.
Consumer spending rose solidly in July when households bought a variety of goods and services. The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.6% last month after an unannounced gain of 0.3% in June. Economists polled by Reuters had predicted that consumer spending would rise by 0.5% last month.
The euro, which represents 57% of the value of the dollar index, hit its weakest level since May 2017. Some say it was related to month-end dimensioning. Others said concerns that the European Central Bank would cut the reference rate and announce a new round of quantitative easing at its September 1
Finally, American investors sought better returns and tried to avoid risk in other countries moving money back to the United States, which is helping to increase demand in dollars.
On Friday September, the US dollar index futures rose 98.860, up 0.405 or + 0.41%.
Daily Swing Chart Technical Analysis
The main trend is up to the daily swing chart. The trend was reaffirmed when buyers took out the main peak on August 1 at 98,700.
The new main floor is 97,370. The main trend will change if buyers take out this bottom.
If the range from 97,370 to 98,970 forms an area, the retracement zone 98.170 to 97.980 becomes the primary downside target.
Daily Swing Chart Technical Forecast
The direction on the US Dollar Dollar Index on Monday is likely to be determined by traders' response to Friday's high of 98.970. The volume may be extremely low on Monday due to a US bank holiday.
A sustained move above 98,970 will indicate the presence of buyers. If this move continues to generate strong upswing, the index will move closer to the main peak on January 3, 2017 at 100,055.
The index will be helped most by a weaker Euro.
A sustained move below 98.970 will signal the seller's presence. The first potential downside is Friday's low of 98.345. Taking this low will make 98,970 a new smaller peak. This can lead to further weakness in the smaller retracement zone of 98,170 to 97,980.
Dealers should also look for a reversal stop for the closing price. By taking out 98,970 and then turning lower for the session, the index will be able to position a potential bow closing price reversal peak. This can trigger the start of a 2 to 3 day counter trend correction.