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Fundamentals

The USDX oscillated during the Asian session on Tuesday (Sept. 5) and is currently trading near 104.4. Besides, the U.S. session closed on Monday, and the ECB showed a hawkish attitude, dragging the USDX slightly lower. Regarding the August PMI data in the Asia-Pacific regions, Australia's second-quarter trade account fell sharply. Later in the afternoon, the Reserve Bank of Australia maintained the existing figure at 4.1%. Moreover, China released the services PMI index at 51.8 in the morning, which is much weaker than July's 54.1 and the expected data of 53.5. As a result. the U.S. dollar was boosted and rebounded in the near term and got stabilized at 104. In addition, the falling investment sentiment will support the USDX, but this is an external factor that will probably fade soon. According to the recent U.S. economic and employment data, although there are no recession concerns, the U.S. economy is cooling down, and investors may start to trade the continuous rate hike suspension in September.

Data: Australia's second-quarter trade account plunged sharply to AUD 7.7 billion, the Reserve Bank of Australia maintained the September interest rate at 4.1%. Meanwhile, China's August Caixin services PMI was 51.8, significantly lower than the expected 53.5 and 54.1.

Focus for today: Eurozone PMI (Aug) and PPI (July), and U.S. Factory Orders for July.

Technical Analysis

Regarding the daily chart, the USDX retraced at the end of August, but it returned above the 5-day and 10-day SMAs and stood over 104 quickly, keeping a strong pattern. Currently, the USDX has reached the half-year high at 104.7, forming a double top with the pattern at the end of August. Furthermore, the MACD indicator oscillates near the overbought area, forming a golden cross and the SMAs are sticking closely. Due to the accumulated momentum, if the USDX fails to surge above the half-year high (104.7), it may face significant retracement pressure. Besides, the initial resistance will be near 104.7, and the further resistance could be near 105 or the half-year high (105.8). Meanwhile, the initial support below will be near the 5-day SMA (103.9) and further support could be near last month's low at 102.8 and 101.8, the area with massive resistance.  

Trading recommendations: Go short after the rebound. If the USDX declines to the 5-day SMA (104.7), investors could go short with small positions, and set the stop-loss at 105.0. To take profits, the first target should be at 103.7, where investors could move the stop-loss to breakeven, and the second target will be at 102.7.  

Trading Recommendations

Trading direction: Short

Entry price: 104.700

Target price: 102.700

Stop loss: 105.000

Support: 103.000/101.800

Resistance: 105.000/105.800