Dollar respecting long term support
Fawad Razaqzada February 26, 2018 4:52 PM
The US dollar turned positive against a number of foreign currencies after opening the new week lower. There wasn’t any news out to support it. But after the recent strength in US data, it is likely that some bearish speculators are probably taking their feet off the gas a little. The rebound looks promising but let's see if this time it will be anything more meaningful. There’s not a lot on the agenda in terms of economic data today and this week, but the new Fed Chair Jerome Powell will be testifying on the Monetary Policy Report before the House Financial Services Committee, in Washington DC, tomorrow. His comments could potentially be market moving. But the trouble is that everyone is expecting the Fed to be hawkish anyway. So, the greater risk would be if we see some surprisingly dovish remarks from Powell instead.
However, regardless of the fundamentals, the technical outlook is starting to look somewhat bright for the greenback. The Dollar Index has now held above the long-term 88.50 support level for 5 consecutive weeks now. This level was resistance back in the years 2008, 2009, 2010 and 2014, before its breakout in late 2014. On the daily time frame, there has been some tentative bullish price action around this 88.50 support such as the formation of a bullish engulfing candle and a potential false break reversal pattern, not to mention the positive divergence on the RSI momentum indicator. While the dollar hasn’t moved away from this level in a meaningful way to suggest that the buyers are back in full control yet, the DXY’s refusal to go further lower means the selling pressure has abated at least. So, this could be the start of a comeback for the dollar but we do need to see evidence that the buyers are back before we can become more confident in our bullish view here. A break above a recent high such as the 90.50 level would indeed be a positive development. However, if in the coming days the DXY breaks below 88.50 then this would invalidate any bullish signs we have seen so far in the month.
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.