By Reuters
Reuters — The US dollar has been gaining ground since mid-September, but signs are emerging that the rally may be running out of steam.
The dollar index, which measures the US currency against six major rivals, has risen as much as 2.8% from its September low.
Last week, it climbed above its 100-week moving average, a closely watched measure used by traders to identify longer-term trends. Moving above that level was initially seen as a sign the dollar had room to climb further.
But the rally stumbled on Friday.
The dollar produced what technical analysts call a “bearish engulfing” pattern, a trading signal that can indicate buyers are losing control and prices could start falling.
Another warning appeared on Monday, when the dollar formed a second pattern suggesting the market was becoming more hesitant about pushing the currency higher.
That makes the next few trading sessions important.
If the dollar index falls below its 100-week moving average, currently around 100.7, traders could turn their attention to the 100 level. A deeper decline could put the Sept. 9 low of 98.5980 back in sight.
But the dollar still has a path higher.
If the recent weakness proves temporary, the next major test would be around 101.63 to 101.80, where the dollar peaked in June and July, according to LSEG data.
Breaking above those levels could open the way toward 102.87 and potentially 104.59.
For now, the dollar’s rally remains intact. But after a strong run since mid-September, the charts are beginning to flash warning signs.—Reuters
