DXY Sets the Stage for Further Resilience in Q4?

DXY, EUR/USD – USD Q4 Technical Forecast:

• USD Achieved a stable winning streak in Q3
• Aim for the possibility of a golden cross on the DXY weekly chart
• meanwhile, euro/usd Facing the effects of a rising wedge

DXY Dollar Index

The US dollar recorded an appreciation in the third quarter of 2023. The weekly time frame below is the DXY Dollar Index. The important point is that Greenback has won at least his ninth straight week. You have to go back to 2014 to see similar consistent performance. How will this set up the currency in the fourth quarter of 2023?

One thing that is interesting to note during this period is the possibility of a bullish golden cross between the 20-week and 50-week simple moving averages (SMAs). Third quarter profits set the stage for this potential formation. If confirmed, it could open the door to a broader bullish technical bias in the coming periods.

This could subsequently extend the push towards the 38.2% Fibonacci extension level at 109.35. Just above that is 112.37, the midpoint before last year’s high of 114.77 began. If not, a dip below the moving averages will focus on the current 2023 low of 99.58. Clearing the latter would open the door to stronger bearish technical conviction.

US dollar weekly chart

Chart created with TradingView

euro/usd

If we look at the euro, we have a very interesting situation. The single currency has lost money for at least nine consecutive weeks, the longest losing streak since 1997. This followed a breakout under a bearish rising wedge chart formation on the weekly chart below. This technically creates a downward bias in the fourth quarter.

The broader impact of the rising wedge breakout could pave the way for EUR/USD to return to last year’s low of 0.9535, below parity versus the USD. Clearing the 23.6% Fibonacci extension level 1.06118 will expose 38.2% points of 1.0201. Otherwise, a turn higher will focus on the July high at 1.1275. A clearing of the latter would provide a stronger bullish bias towards the February peak at 1.1494.

euro weekly chart

Chart created with TradingView

— Written by Daniel Dubrovsky, DailyFX.com Contributing Senior Strategist