The US Dollar Index fell sharply lower last week after the Federal Reserve’s decision to launch a new QE programme weakened the greenback against a basket of major currencies.
US Dollar technical analysis shows that the greenback could correct back towards the 101.35 technical area this week as bullish MACD price divergence has been created, following last week’s decline towards the 98.00 level.
US Dollar Index medium-term price trend
Traders and investors sold the US dollar heavily last week after the Federal Reserve launched an unlimited bond buying programme.
Last week the US Dollar Index reversed towards the 98.00 level, which caught many traders off-guard as the greenback had previously hit a multi-year trading high on March 19.
US Dollar Index technical analysis over the medium term shows that a bearish head-and-shoulders pattern may be forming on the daily time frame.
With this in mind, it is possible that the March 19 high created the head of the potential pattern. A larger drop towards the March 9 low, around the 94.70 level, would confirm the structure of the bearish pattern.
Caution is still advised when selling the greenback, as the US Dollar Index still remains technically bullish while price trades above the 98.00 level.
US Dollar Index short-term price trend
DXY analysis highlights that the index has bullish short-term trading bias while price trades above the 98.85 level.
The recent decline in the US Dollar Index has created substantial amounts of bullish MACD price divergence over the 15-minute time frame.
The 15-minute time frame shows that the bullish MACD price divergence extends towards the 101.35 resistance area.
With this in mind it is possible that the greenback will see an upside correction this week as the divergence is reversed.
It is also noteworthy that the greenback could see extreme short-term volatility this week due to the release of the US monthly jobs reports, which is expected to show that the US jobs market contracted during the month of March.
US Dollar Index technical summary
DXY analysis shows that the greenback could correct back towards the 101.35 level this week. A large bearish reversal pattern may be unfolding across the higher time frames.