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US Dollar Poised to Bounce off of Lows Despite Sentiment Extremes

By , Quantitative Strategist
19 April 2012 15:59 GMT

EURUSDEuro Likely to Turn Lower at $1.32

GBPUSDBritish Pound Breakout Seems Unlikely

USDJPYUS Dollar Forecast to Consolidate vs. Yen

USDCHFSwiss Franc Leaves Few Trade Opportunities

USDCADCanadian Dollar Forecast to Drop off of Highs

GBPJPYBritish Pound Outlook Unclear vs. Yen

ssi_table_story_body_Picture_8.png, US Dollar Poised to Bounce off of Lows Despite Sentiment Extremes

Forex trading crowds remain long the US Dollar (ticker: USDOLLAR) against the Euro, British Pound, Japanese Yen, Swiss Franc, and Canadian Dollar. Normally we would take this as a contrarian indicator that the USD could hit lows. Yet all eyes turn to the Dow Jones FXCM Dollar Index as it holds near critical support and could soon test range highs.

What happens next? In the absence of a major breakout or breakdown in the USDOLLAR, we believe that the Euro/US Dollar and other major pairs will stick to recent ranges. Thus we look for the EURUSD to turn off of recent resistance near the $1.32 mark.

Ultimately we may need to wait until the USD shows real conviction in either direction before taking a strong stance on major USD pairs. The USDOLLAR’s resilience at the 9900 mark suggests risks remain to the upside (downside for EURUSD), but we will need to see the US currency break critical 8-month highs of 10134 before making more aggressive calls for Dollar strength.

View an FXCM Expo presentation on the Speculative Sentiment Index for better understanding on how we use it in our trading.

ssi_table_story_body_Picture_7.png, US Dollar Poised to Bounce off of Lows Despite Sentiment Extremes

How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the SSI via e-mail and other reports from author David Rodríguez, e-mail subject line “Distribution List” to drodriguez@dailyfx.com; Contact David via Twitter at http://www.twitter.com/DRodriguezFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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19 April 2012 15:59 GMT