DXY Pullback needs to break below 21 DMA to gather traction – OCBC

The US Dollar (USD) continued to drift lower as US data overnight was largely within expectations. DXY was last at 106.35, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

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“Daily momentum turned mild bearish while RSI fell. Bearish divergence on daily MACD, RSI observed. Downside play remains likely. Support here at 106.20, 105.40/80 levels (21 DMA, 38.2% fibo). Resistance at 107.20, 108.10 (recent high). Price action continues to show that USD bull momentum is feeling fatigue, and the highs seen last week lacked follow through.”

“Stretched USD valuation, technical signals and potential December seasonality effect (DXY fell in 8 out of the last 10 Decembers) are some considerations for profit-taking on USD longs in the near term. We may need to see a flush out of USD longs before USD can resume its rise (at some point later). There is no US data for released today and Fri due to Thanksgiving Day holidays. As such, razor thin market liquidity may exacerbate choppy moves in FX market on any catalyst.”