The market has embraced the US dollar in the last weeks. However, we still see this upward corrective pattern weakness through the USD/CAD's price action, after the pair failed to test new lows.
The Commitment of Traders (COT) report for USD/CAD and EUR/GBP showed an increasing interest in long positions by institutions.
Pairs EUR/JPY and AUD/CAD have moved up, bringing the DXY's rally to a pause.
Technical Outlook
In the charts provided, arrows refer to entries. Dots indicate direction and bar colors, breadth.
Our weekly chart trend analysis of the US dollar index displays a lack of breadth by the divergence in volume and price and volume distancing from open interest.
The 200 EMA represents resistance and may hold the upside for a few days.
It seems to be reverting higher, and if it closes above the 200 EMA with dark blue, green dotted bars, and blue arrows, we have a possible confirmation of more upside.
Intraday Outlook
On the daily chart, the momentum dots indicate the movement is upwards.
The signal fired on Sept. 22, paused for seven days, and returned at the Asian session's opening, predicting that the US dollar could surpass the weekly resistance soon.
The RSI is not above 80 yet, allowing space for the DXY to rally to higher levels. Open interest has surged, indicating that the market is pricing in a potential tapering of monetary policy.
Conclusion
The Fed has assured that they have tools at their disposal to battle inflation.
Investors interested in going long the DXY should wait for a pullback before jumping on the bandwagon.