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  • The US dollar is under pressure at the start of the week.
  • Bears seeking downside extension towards weekly support.

The greenback has been pressured due to the US elections and prospects of additional stimulus. 

However, the price has been in freefall and a correction can be expected from a technical standpoint. 

The following offers a top-down analysis and the scope for a correction before a downside correction towards the weekly support. 

Monthly chart

The price is down to test a monthly support structure that happens to meet long-term trendline support.

However, depending on where the trendline is drawn, bears may take the view that a more reliable trendline is as follows:

This has been tested more times and can be considered more reliable. 

Significantly, it has acted as a counter-trend line resisted on a retest.

Weekly chart

The retest of the trendline printed a 50% mean reversion, offering an extra layer of confluence to the downside case for the dollar.

Daily chart

From a daily perspective, a correction can be expected at this level of support from which either a 38.2% or somewhere close to a 60% retracement meeting prior structures could equate to the next leg lower. 

The first target that the bears might consider would be a -272% Fibonacci of the weekly bullish correction. 

4-hour chart

However, technical conditions still remain bearish, so there is no confirmation that the downside is not still in play.