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The USD has faced selling pressure over the past 2-weeks. Yesterday, the index (DXY) traded below its 50-day EMA at 92.21, an important price development.
- The moving average set-up between the 20- and 50-day EMAs suggest the uptrend in the DXY that started May 25 remains intact.
- If correct, it suggests the recent pullback from the Aug 20 high of 93.73 has been a correction.
- The 50-day EMA is used as a reference to identify:
- When enough of a correction has occurred and
- Identify price levels where demand interest is likely to increase that would signal a resumption of the trend.
- The DXY traded below it's 50-day EMA yesterday. This suggests the correction has entered the lower end of its range. If correct, it would not be a surprise to see demand pick-up near-term that would highlight a base and a bullish reversal.
- A key support and potential risk parameter for bulls is seen at 91.78, Jul 30 low. A break of this support would strengthen a bearish case and highlight a more significant reversal.
- It is also worth noting that the index has retraced to the 76.4% level of the Jul 30 - Aug 20 rally at 92.24. The retracement has been probed but is holding as a support for now and reinforces the importance of levels below the 50-day EMA and ahead of 91.78.
- The DXY, trendwise, is currently trading at an important short-term crossroads. Levels below the 50-day EMA represent an area where demand interest has the potential to increase. From a timing perspective this is worth noting ahead of today's NFP release.