USD Breakout Takes a Breather as FOMC Minutes Loom
- USDCAD reaches channel top, pauses; holding daily 3-EMA.
The USDOLLAR Index had half of an impressive day yesterday, with the latter half of the day sapping a good deal of potential for an overall stellar performance. Curiously, the turnaround around in the gauge of greenback strength occurred when a non-indexed pair fell back. As we've been watching for several weeks, USDCAD has been the lynchpin for the entire USD-spectrum: when the pair hit channel resistance, all USD-pairs receded.
When viewing the USDOLLAR Index in context of USDCAD, the charts reveal perhaps the best attitude traders could have with respect to the US Dollar in an environment with rising uncertainty: it may be too late to jump on the recent breakout (the risk/reward of getting long inside a channel top is poor); although if you're already long, it might still be worth holding onto (prices in USDCAD and the USDOLLAR Index continue to treat the daily 3-EMA as near-term trend support).
It seems like a good moment for a pause in recent technical developments anyway, with the June FOMC minutes due to be released later today. As strong as the US Dollar has been, it's been on the heels of good, but not great, economic data (the June US labor market report comes to mind). The minutes were recorded when the FOMC was more concerned about US growth, and it would not be surprising to see the dovish sentiment that ultimately lowered the expected interest rate path (per the dot plot) revived when the minutes are released later today. Like the June FOMC meeting itself, any USD-related weakness may be a passing event, as short-term bullish momentum persists.
See the above video for technical considerations in EURUSD, AUDUSD, USDCAD, GBPUSD, and the USDOLLAR Index.
--- Written by Christopher Vecchio, Currency Strategist
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