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USDOLLAR Technical Analysis: Long Dollar Like Lehman

USDOLLAR Technical Analysis: Long Dollar Like Lehman

2016-01-07 13:30:00
Tyler Yell, CMT, Currency Strategist
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Talking Points:

-US Dollar Technical Strategy: Buy the Dip Above 100-DMA

-US Dollar Losing Relative Strength to EUR & JPY

-Seasonal Tendencies Favor USD Strength for January

The US Dollar is pushing its highest close since 2003 and the most consecutive days higher since Lehman went Bankrupt in 2008. However, the concern at present is understandable upon international market stress. The Hang Seng China Enterprises Index or CSI 300 had to halt the trading day after a 7% rout triggered circuit breaker 30 minutes into trading. Stories like this feel look like a good-old-fashioned panic, and the US Dollar remains bid to a specific set of currencies, most notably the commodity currencies, and the GBP. Over the last five days, the Australian Dollar, a component of the US Dollar Index, is off over 4%, and Oil is down ~12% YTD. Whether you blame the Yuan, albeit appropriately or the fear of commodities sending emerging markets into a crisis, it does seem the Dollar bid is firm in the current environment and only a ‘Mea culpa!from the Fed about stating 3-5 hikes this year would likely turn the dial down on the Dollar.

Technically, the US Dollar would be looking for a close above 12,204 to mark the best close since 2003. The price of US Dollar continues to print marginal new highs, but it does seem hesitant to breakout as we have seen in JPY against weaker currencies. Even with the current market stress, we have yet to see anything close to the 2H 2014 & 1Q 2015 move in the US Dollar that was nearly vertical. We remain bullish US Dollar against a confluence of support around the 50% Fibonacci Support, 100-day Moving Average, & Median Line support via Andrew’s Pitchfork that the price recently bounced off in December. We can look to Monthly Pivot Points ahead as upside targets. The R1 has been hit at 12,218, and the R2 sits cleanly at the 12,300 level above the upper bound of the pitchfork’s upper median line.

The preference on US Dollar will remain to buy-the-dip in US Dollar especially in January, which is the US Dollar’s best month from a seasonal perspective. The US Dollar remains out of the top-spot cheap on a relative basis where the JPY, EUR, & CHF currently hold the top spot. The ATR (5) on the US Dollar is near 47 points, and an intraday target to the upside off yesterday’s low would turn the focus back towards yesterday’s high of 12,214/217. A break below 12,170/166 would be a cause of concern for US Dollar bulls and may show the EUR & JPY are firmly in the driver seat as fear steers this market at the open of 2016.

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USDOLLAR Technical Analysis: Long Dollar Like Lehman

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