US Dollar Screaming Higher as Month End Flows Dominate

Sometimes month end flows can come out of nowhere

As we wrote about earlier in the week, sometimes month end flows can come out of nowhere and lead to large, sometimes even exaggerated moves in the market.  Today is the last trading day of the month and that could be what we are seeing today as the DXY heads higher.

DXY broke through horizontal resistance at 98.45 earlier and moved right up to the 127% extension level at 98.78, which is the move from the daily highs on august 23rd to the lows of the same day.  Next target on the upside is the recent high from August 1st at 98.93.  Short term support comes in at the daily low of 98.41.

Source: Tradingview, City Index

As a result of the move higher in DXY,  EUR/USD has taken a nose dive, breaking through the August 1st low at 1.1026.  EUR/USD has traded the whole month of August in a 225 pips range, between the August 1st low and the August 6th high at 1.1250.  Next support comes in at 1.0965, which is the 127% extension from the previously mentioned period.

Source: Tradingview,  City Index

Below that is daily trendline support at 1.0940.   

Source: Tradingview, City Index

The old support level at 1.1026 now acts as resistance above.  Second resistance level is the August 23rd lows at 1.1050.

Be careful the rest of the day and more and more people leave for the long holiday weekend in the US.  As liquidity thins out, volatility could remain.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.