US Dollar Vulnerable to Pullback if S&P 500 Corrects Higher
THE TAKEAWAY – The US Dollar may pull back as S&P 500 positioning gets increasingly oversold, threatening a corrective bounce that weighs on the safe-haven currency.
S&P 500 – Last week, prices confirmed a major Head and Shoulders topchart formationwe began to monitor five weeks ago and slipped below rising trend line support established from the post-Great Recession low in March 2009. Prices are now testing 76.4% Fibonacci retracement support at 1095.42, with a break lower exposing the 1008.10-1053.70 region. Deeply oversold RSI warns that a pullback may materialize before the larger decline unfolds. Near-term resistance stands at 1149.00, the 61.8% level.
CRUDE OIL – Prices are testing major support at $75.46, the 50% Fibonacci retracement of the rally from the major post-crisis March 2009 low. As with the S&P 500, increasingly oversold RSI readings point toward the possibility of a bounce before the larger down move resumes. Initial resistance lines up at $84.72. With that in mind, overt signs of reversal remain absent for the time being.
GOLD – Prices are testing above the Fibonacci extension measured target at $1745.97 implied by the advance from the late January low and subsequent May-July retracement. While the momentum behind the move higher is undeniable, increasingly overbought RSI readings warn that a sharp pullback may be in store, although no actionable evidence of such an outcome in the near term is apparent for now. A break above $1745.97 exposes the $1800/oz figure, followed by the 123.6% level at $1809.27. The $1700 figure is now near-term support.
US DOLLAR – Prices continue testing resistance at a falling trend line set from late May. A pullback seems likely given the overstretched positioning in benchmark risky assets (S&P 500, crude oil – see above), with support still found in the 9508-51 region. Alternatively, a beak higher exposes the triple top in the 9714-64 area.
Created Using FXCM Marketscope 2.0
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