Dollar Index trending downwards after weak jobless claims data

The dollar index is trending downwards after the number of Americans filing for unemployment benefits rose more than expected last week,increasing by 14,000 to 266,000 in the week ended July 23rd compared with the previous week's downwardly revised level of 252,000. The figure came above market expectations of 260,000, the highest in four weeks. However, the underlying trend is still showing robust labor market.

“Claims at this point are telling you that you’re really near full employment,” said Brett Ryan, an economist at Deutsche Bank Securities Inc. in New York. “There’s no evidence that layoffs are picking up. The labor market’s chugging along.”

Technical Insights

Short Term Chart: DXY (15min)

Trend Analysis: Bearish (50 SMA below 200 SMA).

Levels Analysis: Critical support at 96.3 and resistance at 96.6

Takeaway: Referring to yesterday's DXY analysis http://www.marketsdaily.com/potential-head-shoulder-dollar-index-ahead-feds-decision-27-07-2016/, I have warned of a potential head and shoulder pattern in formation. Today, the right shoulder completed the whole pattern and has already broken down the neckline. I am expecting the price to continue moving to the projected price at 96.15 as mentioned. However, the price is currently trading in a small broadening wedge pattern. If it is to break up of the resistance level at 96.6, the initial projected price of 96.15 should be neglected due to a sudden change to a bullish momentum.




Long Term Chart: DXY (Daily)

Trend Analysis: Bearish (50 SMA below 200 SMA).

Levels Analysis: Critical support zone at 91.9 - 93.1 and resistance at 97.60.

Takeaway: In a longer term perspective, my analysis is similar to what I have mentioned yesterday. With the head and shoulder formation in the smaller time frame, I am expecting the price to pull back down to the critical support zone at 91.9 - 93.1. However, a huge descending wedge formation may be the catalyst of a potential large upward movement.