US Dollar Breakdown Continues, Reprieve Ahead?
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- US Dollar breaks key Fibo
- Next couple of days important from a cyclical perspective
US DOLLAR – Breakdown Continues, Reprieve Ahead?
I have been negative on the FXCM US Dollar Index (equally weighted basket of USD versus EUR, JPY, GBP & AUD) since it closed under the 200-day moving average following the lower high last month. Incidentally, the closing high of that move was the very day that the G20 meeting ended so perhaps all the talk of a “gentleman’s agreement” in Shanghai is not all that cloak and dagger – especially when you take into account the central bank rhetoric we have gotten over the last five trading days.
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Technically the index looks in pretty bad shape as the multi-month H&S pattern we warned about looks to be playing out. If it continues, it opens the door to an eventual move towards 11,700. The clear break of the 61.8% retracement of the May - February advance this morning does not help maters either. However, on the plus side the cyclical outlooks is not as dire – at least yet. There is a decent cyclical convergence over the next few trading days that suggests the Buck might attempt to turnaround. If it cannot mount a meaningful recovery during this time it would obviously be another negative development that would signal this USD liquidation is really only beginning. If it can, it opens the door to a possible resumption of the broader uptrend, but it would need to get back over yesterday’s highs to get excited about anything of significance setting up on the upside.
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.