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Dollar Outlook: USD 2018 Uptrend In Focus on Aussie as Yen Gains?

Dollar Outlook: USD 2018 Uptrend In Focus on Aussie as Yen Gains?

Daniel Dubrovsky, Strategist

Dollar Technical Forecast

  • US Dollar path of least resistance in the medium term appears bullish
  • USD/JPY could have another opportunity to resume its drop from Q2
  • AUD/USD December falling resistance may keep the downtrend intact

Not sure where the US Dollar is heading next? We recently released the third quarter US Dollar fundamental and technical forecast!

US Dollar Technical Outlook – Medium Term Bullish

Despite the dovish shift in US monetary policy expectations this year, the Dollar has held up remarkably well. Though the world’s most liquid currency has been in a choppy range as of late if you single out DXY. Examining an average of its performance versus the Euro, Japanese Yen, British Pound and Australian Dollar can help to find a clearer trend.

On the chart below, you will find just that. The USD, despite its oscillation, is held up by a couple of rising support channels in the medium-term. The more relevant one at this point goes back to late March. Combining this with horizontal resistance (1.3043 – 1.3067) creates what appears to be an Ascending Triangle, which is typically a bullish continuation pattern.

The Dollar is still some ways away from a breakout in the context of this pattern, be it higher or lower as support held this past week around 1.2912. But, if it holds, it could carry bullish implications in the medium term while near-term price action acts as noise. In the event triangle floor is tested, the next psychological area below seems to be 1.2798 which is the late June lows.

Custom USD Index: Equal Average Versus EUR, GBP, JPY and AUD

EURUSD

Chart Created in TradingView

Want to replicate this chart in TradingView? Copy the followingformula in the search field:

1/((FX_IDC:EURUSD+FX_IDC:JPYUSD+FX_IDC:GBPUSD+FX_IDC:AUDUSD)/4)

USD/JPYTechnical Outlook – Medium Term Bearish

Against the Japanese Yen, the Greenback did lose some momentum this past week. This is in-line with my third quarter USD/JPY technical forecast as rising support from June 2016 was taken out. While at first this seemed to be a false breakout to the downside, prices retested this critical area as it established itself as resistance earlier this month.

Yet, I am still looking to confirm this downside breakout and a key barrier that appears to have been reinforced is a range between 106.78 – 107.21. Clearing this opens the door for downtrend resumption, but positive RSI divergence warns that downside momentum is fading. This may precede a reversal or translate into further consolidation.

For timely updates on US Dollar price action, you may follow me on Twitter here @ddubrovskyFX

USD/JPY Daily Chart

USDJPY Price

AUD/USD Technical Outlook – Medium Term Bearish

Versus the Australian Dollar, the Greenback is at a potential turning point. AUD/USD finds itself testing falling resistance from December after the psychological barrier between 0.70482 and 0.7022 was taken out. Though I am still awaiting technical confirmation to argue if the latter could translate into a meaningful trend.

If in the week ahead, we see descending resistance hold and translate into a reversal of the near-term uptrend, the Aussie could be at risk to selling pressure down the road from a technical standpoint. In such circumstances, keep an eye on what could be a potential rising support area from the middle of June – blue area below.

AUD/USD Daily Chart

AUDUSD Price.

* Charts created in TradingView

FX Trading Resources

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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