On Monday (February 2), the US dollar index rose slightly during the US trading session, poised for its fourth consecutive day of gains. As of 00:51 Beijing time, the US dollar index was at 97.5785/849, up 0.449, or 0.46%.



US Dollar Index Daily Chart Analysis

Looking at the daily chart of the US dollar index, the overall trend remains downward, with the current fluctuation range between 100.390 and 95.560. The first upward target is the retracement range of 97.522-97.987. The US dollar index reached a high of 97.546 during this trading day.

Influenced by the overall downward trend, when the US dollar index first tests this retracement range, the market may experience selling pressure, and traders will take the opportunity to try to build bottom support. Even if buyers break through the 97.987 level, they will still face resistance from the 50-day moving average at 98.4572 and the 200-day moving average at 98.6080.

The main support levels for the US dollar index are 95.560 and previous lows of 96.2109 and 96.3729.

Can the US dollar index establish a solid bottom support?


(US Dollar Index Daily Chart Source: FX678)

While a rebound in the US dollar index is possible, it will still take some time to establish bottom support above the aforementioned key lows. This support level needs to be sufficiently robust to drive the upward momentum and accumulate enough strength to break through the 97.522-97.987 retracement range.

If buyers can break through the moving average resistance zone of 98.4572-98.6080, the overall bearish trend of the US dollar index will completely turn into a bullish one. This zone is also expected to become a springboard for the US dollar index to accelerate its upward movement, launching an attack on the resistance levels of 100.390 and the previous high of 99.492.

Warsh's nomination boosted the dollar, while commodity prices weakened.

From a fundamental perspective, investors are still assessing the potential impact of new Federal Reserve Chairman nominee Kevin Warsh on Fed policy. Meanwhile, weakening prices of commodities such as gold, silver, and crude oil have also provided some support for the US dollar.

Analysts believe that Warsh is less likely to push for a comprehensive and rapid rate cut by the Fed compared to other candidates who have competed for the position of Fed chairman, although his stance is more dovish than that of current chairman Jerome Powell.

Mohamed Salaf, deputy analyst for foreign exchange and fixed income at Danske Bank, said: "On the surface, Kevin Warsh is the Trump nominee who is most likely to drive the dollar higher. While the political risk premium on the dollar cannot be said to have been completely eliminated, at least some of the short-term risks have been mitigated."

Key employment data will be released this week.

Despite Warsh's nomination boosting the dollar, U.S. Treasury yields were virtually unchanged on Monday, February 2. Later this week, dollar traders will see a number of economic data releases, including the latest Job Openings and Labor Turnover Survey (JOLTS) and the ADP Employment Survey, which will provide key insights for investors assessing the state of the U.S. labor market.