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US Dollar Extends Advance Despite S&P 500 Resistance Break

By , Currency Strategist
25 May 2012 01:48 GMT

THE TAKEAWAY: US Dollar continued to press higher despite an upside break from the S&P 500 but highly overbought technical studies warn that a pullback may be nearing.

S&P 500 – Prices broke through resistance at 1322.10, the 23.6% Fibonacci retracement, after completing a Bullish Engulfing candlestick pattern above support at 1292.90. The bulls now aim to challenge the 38.2% Fib at 1341.70. The 1322.10 level has been recast as near-term support.

US_Dollar_Extends_Advance_Despite_SP_500_Resistance_Break_body_Picture_5.png, US Dollar Extends Advance Despite S&P 500 Resistance Break

Daily Chart - Created Using FXCM Marketscope 2.0

CRUDE OIL Prices put in a Harami candlestick pattern above resistance-turned-support at 90.49, hinting a corrective bounce may be ahead. Positive RSI divergence reinforces the case for an upside scenario. Initial resistance lines up at 92.51, a former support marked by the December 16 low, with a push above that targeting the February 2 low at 95.41.

US_Dollar_Extends_Advance_Despite_SP_500_Resistance_Break_body_Picture_6.png, US Dollar Extends Advance Despite S&P 500 Resistance Break

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD Prices narrowly slipped below support at 1560.98, the 23.6% Fibonacci retracement, exposing the next key downside barrier in the 1522.50-1532.45 region. The lack of meaningful conviction on the break lower puts follow-through into question however, suggesting the 38.2% Fib at 1582.10 may still be the most significant near-term resistance threshold.

US_Dollar_Extends_Advance_Despite_SP_500_Resistance_Break_body_Picture_7.png, US Dollar Extends Advance Despite S&P 500 Resistance Break

Daily Chart - Created Using FXCM Marketscope 2.0

US DOLLAR Prices continue to edge higher after taking out resistance in the 10134-41 area marked by the 76.4% Fibonacci expansion and the October 2011 swing high. The bulls target the 100% level at 10241 as the next major upside objective from here. RSI studies are at their most overbought since prices set the last major top however, warning that the threat of a pullback is significant. The 10134-41 region has been recast as near-term support.

US_Dollar_Extends_Advance_Despite_SP_500_Resistance_Break_body_Picture_8.png, US Dollar Extends Advance Despite S&P 500 Resistance Break

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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25 May 2012 01:48 GMT