Talking Points:
-US Dollar Technical Strategy: USD Continues To Recover From Last Week’s Sell-Off
-Focal Resistance at Last Week’s High of 12,205
-Intermarket Analysis Favors Buying Weakness Due To Risk: Reward
The US Dollar has a lot going for it fundamentally, but the technical picture may encourage traders to wait for clarity. After topping out earlier this month at 12,219, the price has moved sideways in apparent anticipation of December 3rd. On 12/3/15, Mario Draghi is likely to determine the fate of the USD’s counterpart, the EUR over the next handful of months and Janet Yellen speaks to the Joint Economic Committee at Congress, where she could provide insight into the all-important questions, “How High Will the Fed Go?” While the USD enthusiasm is lacking relative to what we saw off the October 15th rebound, the larger technical picture is more encouraging here than anywhere else.
Spanning over May to late October, the price zone of 12,127, the March 13th close and 12,104, the late September intraday high have proved important. Because a key tenant of technical analysis is that price has memory and will react in the future in a similar way to how it has in the past, it’s helpful to keep a focus on that zone. An encouraging note for US Dollar bulls is that after the post-FOMC minutes sell-off, the strong dollar drophasn’t gained momentum and for now, the November 19th low of 12,108 will be treated as the next level of support beyond the zone mentioned above.
Lastly, it’s important to note the price action in relation to the time of year and the upcoming significance of events in December. Namely that we’re heading into a US Holiday (Thanksgiving) before a slew of events that could determine the direction of US Dollar with the Federal Reserve rate announcement on December 16th, and other events that will heavily influence other major currencies like the OPEC meeting and November Non-Farm Payrolls at the beginning of the month. The onslaught could leave US Dollar index moving sideways in the form of a price triangle over the holidays until clarity is presented with the economic releases. However, sideways price patterns like triangles favor the underlying trend, which in the US Dollar’s case, is higher.
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