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US DOLLAR Technical Analysis: Set To Hold Key Support

US DOLLAR Technical Analysis: Set To Hold Key Support

Tyler Yell, CMT, Currency Strategist


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Talking Points:

-US Dollar Technical Strategy: US Dollar Favors Buying Weakness

- Short-Term Support Zone In Focus: 12,127-12,110

-US Dollar May Be Big Winner As Few Things Else Look Attractive

Earlier today, US Dollar took a hit as Janet Yellen of the Federal Reserve mentioned that Policy Makers ‘should be mindful’ of new channels of Monetary Policy. This statement led some to believe that we may be setting up for a ‘dovish hike’ on December 16th. A dovish hike would entail a rate hike, likely 25bp, but could be followed by an overtly dovish message that could state it would be a long time before the next rate hike. However, as long as price remains above support and other markets fail to catch a significant bid, the US Dollar should continue to be the lone star in the G10.

After last week’s aggressive rally into 2015 highs, this week has seen a small retracement of ~38.2% last week’s move. However, even though we’ve had a bearish week, the US dollar remains above multiple levels of key chart support (see chart below). The next level of support in focus is the pre-November 6th closing high for the year on March 13th at 12,127. Below there, a handful of support levels aligning between 12,104, the late September high to 12,110, the October 28 high. Without a day close below this zone, it’s difficult to make the case for the bear side.

In a bull market, small setbacks are often a good chance to get in with a favorable risk: reward. Breakout entries can keep you out of bad trades, but they also leave you exposed should a pullback soon surface. The chart below shows you a few levels on the downside to focusing on for a potential price pivot before a break higher emerges. First, the ‘i’ peak from September 4h aligns with multiple price pivot resistance points that could soon turn into resistance. If that zone fails to hold, the next potential pivot would be near the Weekly S1 pivot, and 38.2% pull back near 12,070/80. A break below there would warrant caution or potentially exiting long USD exposure until clarity emerges. T.Y.

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