USDOLLAR - Is King Dollar About To Get Dethroned?
- During the past two weeks USDOLLAR has made several attempts to break 2009 highs
- After rejection at highs, now testing significant up trend-line support on Daily/4hr chart
- Key technical events in currencies (EUR / AUD / GBP) point to future USD weakness
- Technical landscape puts USD in precarious position as we head into Friday’s NFP #
In the past couple of weeks three of the four components in the equally weighted USDOLLAR Index have had significant technical events which lend support to the notion that USD could be on the cusp of entering the deepest decline since the October correction. Recently, EURUSD and AUDUSD bulls capitulated after fundamental events which ‘should’ have sent them much lower. When a currency doesn’t do as it ‘should’, it’s a warning that a reversal in trend and sentiment could be under way – It’s the stuff tops and bottoms are made of, even if only in the near-term. GBPUSD broke out of an ‘Inverted Head-and-shoulders’ pattern at major long-term support. The fourth constituent, USDJPY, has been living in a bubble; it’s been more closely levered to stocks than the FX market, and thus rangebound.
With the USDOLLAR Index hanging precariously in the technical balance (rejection at 2009 high, testing up-trend support), U.S. NFP data tomorrow (1330 GMT) could be the fundamental event which triggers a major technical event; a break of a multi-month trend-line. A mantra I have learned to follow over the years is this – 'Trend-lines are to be trusted until broken', and with that said, I’ll be waiting for a confirmed break before becoming full-on bearish.
Written by Paul Robinson, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.