The new year is fully in swing now, and there are some interesting things brewing with the US dollar. As you can see on the daily chart below, the USD Index has been mainly consolidating for the last few weeks after falling out of an earlier range back near the start of December. The recent action, however, has seen the market push up through the top of that area. This comes as the relatively narrow Bollinger Bands have begun widening out once more. That is usually a good indication of a new directional move starting to develop.
There’s a fair bit of resistance overhead for the index to overcome, of course. Prior rally failures near 81.00, 81.40, and 81.50 all point to the potential for the bulls to struggle to generate serious momentum.
There’s a bit of a added factor supporting the greenback here, though. The first part of the year is generally a strong one for the dollar (see this forex seasonals research). That is something which could give the USD Index a nice tail wind in the days and weeks to come.
If the season factors do indeed help drive a new uptrend, the real test would be around the 82.50 area. That’s a key price zone in the weekly timeframe. The reaction to testing it would tell us a lot about the longer-term prospects for the dollar moving forward as in that time frame we’re also seeing the sort of narrow Bollingers which often preceeds a new trend.