USD rallies remain vulnerable to being sold (technical breakdown)

The USD has been through very choppy price action over the past few weeks, as market players battle with fundamental themes and their meaning for direction of the greenback. There has been a boost in trading today, after a much stronger than expected U.S. retail sales report. However there are still some lingering fundamental factors that can very likely cap USD bulls, read the full points here:

Technical breakdown: USD Index (DXY)

The USD commenced a recovery from the early part of January, following the beating through much of 2020, losing some 20%.

In terms of the monthly closure in January, it did finish in the green after two big months of selling in November and December. The candle was somewhat of a potential reversal one, which could be a hammer or morning start. It would only be validated should February close above January.

The pullback looking via the weekly and daily is somewhat suspect, it does not appear to have as much conviction, in comparison to April 2018. An area of which the bulls previously managed to quickly and strongly push away from the big demand zone.

Price action has seemingly formed a bearish flag structure or rising wedge, of which has been breached. The retest is now being eyed in the region of 91.05-20, in proximity to the former lower acting trendline of the pattern. A potential head and shoulders structure can also be viewable, with the right shoulder in construction, the neckline would be noted at around 90.10. How the price responds to the incoming area of resistance will be key for the next committed near-term direction.


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