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US DOLLAR Technical Analysis: Mid-Week Run At New Highs Falls Short

US DOLLAR Technical Analysis: Mid-Week Run At New Highs Falls Short

Tyler Yell, CMT, Currency Strategist


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Talking Points:

-US Dollar Technical Strategy: New Highs Seem All-But Inevitable

-Support in Tighter Focus than Resistance for Trend Sustainability

-Momentum per RSI (5) Looks Stable To Push the Price Higher

The US Dollar made a late-session run toward the November 6th, 2015 and the Year-to-date high of 12,219 on Janet Yellen’s comments. Chairwoman Yellen noted that the rate hike schedule was not predetermined, but she also noted the health of the economy was encouraging. Yellen will also speak tomorrow before the Joint Economic Committee of Congress, and she could be asked to explain the flight path in more detail. Any details that come out tomorrow that turn attention above 1.00%, which the US 2yr Treasury is currently pricing in could lead to further US Dollar strength. A lack of clarity from the Chairwoman would likely lead focus toward Friday’s Non-Farm Payroll. Today, we received a warning shot that Friday’s NFP number could be encouraging in the form of the ADP private payroll that came in at 217k vs. expectations of 190k with an additionally positive tone coming from an upward revision of last month’s numbers. All in all, we continue to come up short when looking for substantive reasons that the USD Bull Run is nearing an end.

Technically, the key support that is comprised of the zone of corrective highs from September and October and the March 13th closing high of 12,127 continue to encourage bulls. As we’ve seen from the SPX500, Bull markets are hard to stop. The US Dollar looks to be on a similar course that little will stop the US Dollar Bull Market, and a buy-the-dip environment is favored over trying to sell a top. Resistance remains at the YTD high of 12,219, but the economic calendar could push the price easily through that level if USD bulls are surprised by a better NFP number of the counterparts the US Dollar index continue to underperform. Beyond 12,219, the focus will turn to the Weekly R2 Pivot level ~12,250.

After a dismal ISM report earlier this week, we saw the US Dollar sell-off but stop well above the key support mentioned below. The low was near the Weekly S1 Pivot support, and a stop below this week’s low or lower in the key support zone and Weekly S2 Pivot support appear appropriate given the environment. Many traders understandable go back-in-forth between different fears, and one of the strongest fears is that of being the last one on the train. Only hindsight can reveal whether the entry was bad, but most signs now in FX and Intermarket analysis still favor further dollar strength, which will keep my eyes higher until we close below the S2 and 12,127/12,104 support. RSI (5) remaining above support continues to encourage USD Bulls as well.

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