Top Story

Dollar basing continues

The US dollar has been stuck trading in a narrow range for several weeks now after a significant correction since the start of 2017 came to a halt. Market participants have been considering whether the greenback has depreciated more than it should have given the still-positive fundamental backdrop. In February, the Dollar Index had halted a sharp three-month slide. However, last week’s gains were not enough to ensure of a positive end for the month of March. So, the index still remains in the negative territory three months into 2018. At the moment, support from high expectations for further monetary policy tightening from the Fed has been offset by ongoing political pressures and global trade uncertainties. Relative strength in rival currencies, including both the euro and yen, have also helped to keep the dollar pressured, while weakness in commodity currencies have helped to support the greenback. The dollar’s latest attempt to recover was halted most recently and ironically by the Fed. Although the FOMC forecasted higher economic growth and interest rates going forward, its tepid outlook for inflation along with its unchanged median estimate of only two more rate hikes in 2018 precluded the dollar from rallying out of its prolonged slump. Let’s now hope that Friday’s jobs report will trigger a decisive move in the dollar in one or the other direction.

From a technical point of view, however, we can observe a few bullish indications around the long-term pivotal level of 88.50 which had been a significant resistance on the historical charts. This level has so far held its own and we have had a nice reaction from it already back in the middle of February when it created a bullish reversal pattern in the form of an engulfing candlestick here. The dollar index has since made a higher high, which unfortunately did not hold for too long as price then pulled back. However, now it may have created a higher low around 88.95 (as noted on the chart). This could be significant as it suggests that the sellers are losing control.

So, the dollar looks like it is trying to establish a base here and in the event it breaks through upcoming resistance area between 90.50 and 91.00 then we could see the start of a sharp move up towards at least the next trouble area at 91.90-92.50. Meanwhile the next support comes in at 89.63; below here there’s not much further support until that 88.50 level.


Source: eSignal and FOREX.com. Please note, this product is not available to US clients

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.