The debt-ceiling impasse in Washington is currently the primary driver of the dollar's performance. Negotiations between President Biden and congressional leaders are set to resume on Tuesday, but without positive news, investor fears may continue to grow. As such, the balance of risks is currently tilted to the upside for the dollar, with safe-haven flows likely to continue as risk sentiment remains subdued.
Fed speakers such as Raphael Bostic, Austan Goolsbee, Neel Kashkari, and Lisa Cook may also have an impact, with some pushback against rate cut expectations. Chair Jay Powell is due to participate in a panel discussion titled "Perspectives on Monetary Policy" on Friday. This will be a key event to watch.
The daily USDOLLAR chart is trading in its bullish channel between the upper blue and red bands. This is accompanied by an RSI on the bullish side of 50 (left green rectangle). If the daily indicator maintains this position, the greenback is likely to be supported.
The hourly chart has support at the central and S1 pivots. There is also price support around the 12,800 level. We are watching the trend-following EMAs and momentum based-stochastic. If these cross positively, it will be regarded as a bullish development, as dollar bulls forge ahead.
Keep an eye on the stochastic's 80+ levels (blue arrow). If the stochastic makes it to these levels and holds, then an underlying bullish momentum will be present. This will likely prove to be price supportive on the short-term chart.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.