Daily Market Recap – DXY rebounds on encouraging fundamentals

The greenback has been rallying since last Friday. Strong U.S. data have rekindled the appetite for the dollar, which recorded its best daily performance in nearly two months.

Not only did household income come in above expectations, up 21.1%, but the final April reading of the University of Michigan's consumer sentiment index came in at 88, its highest level since the start of the pandemic, suggesting that American consumption will increase significantly in the coming months.

This is an extremely positive point when you consider that household consumption accounts for 67% of the US GDP...

Another encouraging economic indicator is the Chicago PMI, which rose to 72.1 in April, its highest level in over 37 years, suggesting a strong acceleration in manufacturing activity in April.

This is all great news for USD bulls as if the strength of the recovery is confirmed, the U.S. central bank may have no choice but to raise rates faster than expected, which should support the dollar.

That's why the U.S. employment figures for April expected on Friday will be closely watched by the market. Analysts expect more than a million jobs to be created last month.

On the technical analysis front, the DXY outlook turned bullish again on Friday night after a “morning star” formed on the daily time unit. This bullish reversal pattern on Japanese candlesticks didn't happen just anywhere as it formed after the DXY fell on its bullish oblique through the January and February lows.

The combination of the rebound from the oblique and the morning star offers a bullish outlook for the dollar, and this outlook could be strengthened if the resistance at 91.41 points is breached. A breach of this resistance would form a bullish “inverted head and shoulders” reversal pattern on the 4-hour time unit.

(Chart Source: Tradingview 04.05.2021)

The current bullish outlook would be technically invalidated in the event of a pullback below Friday's low of 90.40 points.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.