DXY, EURUSD Reversing After Sentiment Extremes
The US Dollar Index (DXY) is having a tough go at it today with the EURUSD rallying sharply. To end last week the Euro came within a handful of pips from the 2017 low at 10341 before reversing course. The bounce has the first level of resistance in focus.
The 2020 low at 10636 was breached a few weeks back, recently tested as resistance on a small bounce. It will be the first level to watch for signs of a weakness to occur should price have enough momentum to get to that point. There is also a trend-line that will likely be in confluence as well, it runs down from the late March peak.
Given the extremes we saw in sentiment on the dollar move, a retracement of such a small amount, relative to the larger move, should be doable.
This will likely have the DXY trading down near 10235, the monthly low. That would be an interesting spot to see how the market responds. Given how extreme the trend became, even if it we are to see it reassert itself relatively soon, a bounce off support and range appears to be a likely scenario.
For the DXY all of this is occurring around the 2017 high, and while we have seen the level matter in recent trade, a range around the level could form and it could end up losing its relevance.
For now, the outlook in the near-term trading bias is up for the EURUSD and down for the DXY, but that could quickly change as levels come into play and a sideways chop could develop.