US Dollar Forecast: USD Trade Setups & Themes for Next Week

US DOLLAR FORECAST: USD TRADING LEVELS CHARTS FOR NEXT WEEK

  • The DXY Index is on gait to tighten a week during a top turn given Oct final year with strong US mercantile information underscoring strength of a American economy
  • USD cost opinion stays upbeat forward of Jan FOMC mins due for recover subsequent week
  • FX sensitivity could arise into subsequent week if coronavirus fears light adult again and prompt another pierce safe-haven currencies, that has intensity to continue bolstering a US Dollar

The US Dollar has dominated a banking marketplace given a start of 2020 with a DXY Index – a benchmark measuring USD opening opposite a basket of other major banking pairs – charging 2.7% higher.

USD Forecast
USD Forecast

Greenback gains so distant this year can be essentially attributed to new strength of a US economy outperforming relations to baseline expectations, that has been exacerbated by an liquid of risk-aversion due to concerns over a novel coronavirus outbreak.

DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (JULY 2019 TO FEBRUARY 2020)

DXY Price Chart US Dollar Index Technical Analysis

Chart combined by @RichDvorakFX with TradingView

The DXY Index is on gait to tighten above a 99.00 hoop as forex traders continue to bid adult a US Dollar following a array of plain mercantile information releases like nonfarm payrolls reported final week in serve to acceleration total and consumer view data published this past Wednesday and Friday respectively.

After commanding a 76.8% Fibonacci retracement turn of a US Dollar Index’s many new bearish leg, there seems to be an open widen of runway for USD cost movement to continue a climb aloft to 2019 highs.

Forex for Beginners
Forex for Beginners

Although it is tenable that a US Dollar is overextended, a expanding Bollinger Band ™ could maybe promote serve upside intensity before a mean-reversion reduce or converging occurs.

USD MAY RISE IF FED BALANCE SHEET GROWTH DECELERATES

Fed Balance Sheet Chart US Dollar Forecast

Another elemental growth that has softened USD cost opinion is a initial pointer of a Federal Reserve easing off a gas per a speed of change piece expansion.

Specifically, a New York Fed announced Thursday afternoon that it will diminution a total extent on overnight repurchase agreement operations (repos) from $120 Billion to $100 Billion and top for tenure repos from $35 Billion to $25 Billion.

US DOLLAR COULD EXTEND GAINS IF FOMC MINUTES UNDERSCORE NEUTRAL MONETARY POLICY OUTLOOK

Chart of FOMC Interest Rate Cut Probabilities US Dollar Forecast

Likewise, an additional pivotal motorist of a US Dollar’s instruction over a entrance trade days will expected be changes in FOMC seductiveness rate change probabilities.

Minutes from a January Fed meeting are slated for recover subsequent week according to a economic calendar, that could hint an assertive change in Fed rate cut bets and analogous pierce in USD cost action.

USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (1-WEEK)

USD Price Chart US Dollar Forecast

Take a demeanour during this discernment on how to trade a Top 10 Most Volatile Currency Pairs

Options-implied trade ranges are distributed regulating 1-standard flaw (i.e. 68% statistical luck cost movement is contained within a pragmatic trade operation over a specified time frame).

That said, currency volatility for a week forward appears comparatively pale judging by a latest 1-week pragmatic sensitivity readings opposite several vital and teenager banking pairs.

Top Trading Opportunities in 2020
Top Trading Opportunities in 2020

If coronavirus fears take a behind seat, a USD and broader DXY Index could face downward vigour due to vanishing direct for safe-haven assets such as a US Dollar given a immeasurable liquidity.

Read More: USD Charts for Next Week EUR/USD, USD/JPY DXY

— Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time marketplace insight