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US DOLLAR Technical Analysis: Can NFP Moonshot Hold?

US DOLLAR Technical Analysis: Can NFP Moonshot Hold?

Tyler Yell, CMT, Currency Strategist


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Talking Points:

-US Dollar Technical Strategy: US Dollar Favors Continuation Higher

- Weekly Close above Prior YTD High Invigorates Bulls

-US Dollar May Get Bullish Benefit of the Doubt Into December 16th, FOMC Meeting

The US Dollar surprised even the optimists on Friday, and the index closed at its highest level in 12 years. As we closed last week's technical analysis note on the US dollar, we are sticking with the upside until there is reason not to, and that reason remains absent. Looking at multiple dollar indices like DXY & BBDXY, there appears to be a breakout that could sustain itself well into the hotly anticipated December 16 FOMC announcement, where Janet Yellen and the Federal Reserve may raise the reference rate for the first time since 2006. One development since Friday that’s worth keeping an eye on is the Interest Rate Hike Probability. We’ve seen a steady drop from post-NFP of 72%, now down to 66%. A further drop would show confidence in the USD is waning as well.

The US Dollar index will look to Friday’s high of 12,219 followed by the 1.272% extension of the September 4 through October 15 range. Confident Bulls will look higher toward the equal wave target off the May Low near 12,244. Friday’s low would need to break before bears begin to think any momentum is shifting in their direction. Furthermore, an argument for the bear case will be difficult to make until the November opening range low of 12,013 is broken with a daily and/ or weekly close.

We’re now looking at a ‘buy-the-dip’ market given the US Dollar strength. Value buyers should keep an eye on the weekly pivot of 12,145 and then the November 6 low of 12,104. A break below there would show the enthusiasm that came with that NFP print has dissipated and longs may become too expensive. If those hold, upside targets will sit near 12,315 and could even extend to 12,600 (1.618% extension off the May-Sept.-Oct extremes). From an Elliott wave perspective, US Dollar could be considered starting the 3rd leg of a 5-wave rally that began in August. If this is accurate, then pullbacks can present great opportunities.

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