USDOLLAR Index Losses May Have Further to Run
- USDOLLAR Index achieves head & shoulders target of 11650/60.
- January swing low near 11587 now in focus.
- See the May forex seasonality report.
Despite achieving its head & shoulders topping target, there is evidence the greenback may remain under pressure in the days ahead. The USDOLLAR Index has evolved into more of a momentum market this week, whereby the symmetrical triangle breakdown post-NFPs provoked another rush of covering among traders holding long positions (quite a few remained, with 58.9K net-long contracts still on the table as of May 5, off of the all-time high of 81.3K contracts set for the week ended March 10, 2015).
To wit, EURUSD continues to extend its rally higher within its channel from the April 13 low, and looks primed to make a move towards its triangle/double bottom target at $1.1567. Similarly, USDCAD, which has been a leader for USD-pairs in recent months, looks feeble near its descending triangle support; and in the context of not yet having achieved its own double top target, USDCAD may extend its losses further towards C$1.1867. These observations lead us to believe that the USDOLLAR Index could continue through its head & shoulders target to the mid-January swing low of 11587 before a more significant technical base is established.
--- Written by Christopher Vecchio, Currency Strategist
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