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US Dollar Breaks Higher But Relative Strength Studies Warn of Pullback

By , Currency Strategist
31 May 2012 02:51 GMT

THE TAKEAWAY: The US Dollar resumed its breakneck advance, setting a new yearly high, but relative strength studies warn that a pullback may be brewing in the days ahead.

S&P 500 – A sharp bearish reversal has produced a Bearish Engulfing candlestick pattern and brought prices to support at 1306.50, the 23.6% Fibonacci expansion. A break below this boundary exposes the 1288.00-1292.90 area marked by the October 27 high and the 38.2% expansion. Near-term resistance lines up 1335.90, the May 29 session high.

US_Dollar_Breaks_Higher_But_Relative_Strength_Studies_Warn_of_Pullback_body_Picture_5.png, US Dollar Breaks Higher But Relative Strength Studies Warn of Pullback

Daily Chart - Created Using FXCM Marketscope 2.0

CRUDE OIL Prices broke through support in the 90.14-88.54 region marked by the early September swing top and the 61.8% Fibonacci retracement. Sellers now aim to challenge the 76.4% level at 83.34. The 90.14-88.54 area has been recast as near-term resistance.

US_Dollar_Breaks_Higher_But_Relative_Strength_Studies_Warn_of_Pullback_body_Picture_6.png, US Dollar Breaks Higher But Relative Strength Studies Warn of Pullback

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD Prices continue to consolidate above support in the 1522.50-1532.45 area. Near-term trend line support-turned-resistance lines up at 1586.09. A break above this boundary exposes the 1600/oz figure followed by the top of a channel set from late February, now at 1614.45.

US_Dollar_Breaks_Higher_But_Relative_Strength_Studies_Warn_of_Pullback_body_Picture_7.png, US Dollar Breaks Higher But Relative Strength Studies Warn of Pullback

Daily Chart - Created Using FXCM Marketscope 2.0

US DOLLAR Prices took out resistance at 10220, the 61.8% Fibonacci expansion level, overturning a bearish Breakaway candlestick pattern identified earlier this week and exposing the 76.4% barrier at 10316 as the next upside objective. Negative RSI divergence warns of possible pullback in the days ahead however. The 10220 level has been recast as near-term support, with a break below that exposing the 10134-43 area.

US_Dollar_Breaks_Higher_But_Relative_Strength_Studies_Warn_of_Pullback_body_Picture_8.png, US Dollar Breaks Higher But Relative Strength Studies Warn of Pullback

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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31 May 2012 02:51 GMT