After consolidating for several days, the U.S. dollar moved sharply lower against a basket of currencies on Wednesday after the United States and China inked a deal to de-escalate their trade war. The bulk of the loss was fueled by a weaker Japanese Yen and Euro.
The price action suggests investors are giving the deal the benefit of the doubt initially as worried investors likely shed U.S. Dollar hedges placed as protection against an escalation of the trade war.
To some, the trade deal represents a line in the sand for both economic powerhouses. Both the U.S. and especially China are expected to keep up their end of the deal. Some say tensions between the two countries are expected to continue despite the signing of the agreement. One factor that caught investors by surprise on Tuesday was that the U.S. tariffs against China are likely to continue beyond the 2020 U.S. presidential elections.
At 21:09 GMT, March U.S. Dollar Index futures are trading 96.960, down 0.134 or -0.14%.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through 97.405 will change the main trend to up.
The minor trend is up, but Wednesday’s price action made 97.305 a new minor top.
The main range is 98.045 to 96.020. Its retracement zone at 97.035 to 97.270 is resistance.
The major resistance zone is 97.380 to 97.700. The major support zone is 96.700 to 96.220.
On Wednesday, the March U.S. Dollar Index plunged when it crossed to the weak side of a downtrending Gann angle at 97.075 and the main 50% level at 97.035. The retracement level and the Gann angle are new resistance.
If the downside momentum continues then look for the selling to possibly extend into the major 50% level at 96.700 and the next uptrending Gann angle at 96.645.
This article was originally posted on FX Empire