We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bullish
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The price of #gold may continue to exhibit a bullish behavior in June as the pullback from the yearly high ($1765) reverses ahead of the May low ($1670). Get your Gold market update from @DavidJSong here: https://t.co/OeaYtCpcIo https://t.co/UQVPIVCTCP
  • The $USD breakdown has taken the index into confluence support at the objective yearly open. Get your USD technical analysis from @MBForex here: https://t.co/A16XEv6n4d https://t.co/GzEp3gCAe5
  • US equities continue to run higher with the Nasdaq 100 setting a fresh all-time-high, not even three months after giving back almost a third of its value in about a month. Get your #Nasdaq technical analysis from @JStanleyFX here: https://t.co/1LI54uvI8x https://t.co/e9FvSLqfaA
  • The US Dollar may be at risk to losses against some of its #ASEAN counterparts. USD/SGD, USD/PHP, USD/MYR and USD/IDR have recently broken to the downside. Will losses continue? Find out from @ddubrovskyFX here: https://t.co/0RTlj6maTT https://t.co/UyQ4i0AihI
  • The British Pound technical outlook still seems to favor the downside. GBP/CAD may pressure key rising support from August as GBP/AUD could prolong its downtrend. GBP/CHF may fall. Get your $GBP market update from @ddubrovskyFX here: https://t.co/hBOpDKXmfW https://t.co/AJlT2YKeCu
  • USD/JPY is approaching medium-term uptrend resistance and while the outlook remains constructive, the advance may be vulnerable near-term while below confluence resistance. Get your $USDJPY technical analysis from @MBForex here: https://t.co/93D7AyhHtG https://t.co/KQcLLrkMP3
  • AUD/USD has had the most impressive show of trend over the past couple of months with the pair gaining almost 1500 pips from the March low. Get your $AUDUSD technical analysis from @JStanleyFX here: https://t.co/vLz4Rpln3u https://t.co/AOwnJja5V8
  • Has the #Euro been saved? Find out from @CVecchioFX here: https://t.co/eiXfOTyGa6 https://t.co/AyRiYpb4cN
  • U.S. Market Analyst at https://t.co/JsVsSmefgR, Shain Vernier covers - ✔️ Safe haven assets in volatile markets ✔️ Central banks and governments ✔️ How will commodities trade in a recession Only on Trading Global Markets Decoded #podcast. Tune in here: https://t.co/1UmEzEbwiy https://t.co/ygwjGNvS61
  • The $USD, Euro, British Pound and Australian Dollar will all be at the mercy of political developments in Asia, Europe and North America this week. An avalanche of PMI data will set the backdrop. Find out from @ZabelinDimitri here: https://t.co/L8cfAgVx94 https://t.co/THWhPAS6AM
US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

2016-05-18 18:50:00
Tyler Yell, CMT, Currency Strategist
Share:

Talking Points:

  • US Dollar Technical Strategy: Declining ATR into Resistance Remains A Worry
  • US Dollar’s Has Cleared Its Biggest Technical Test of April Highs, Now Onto 12,001
  • Who Will Win Between Hedge Funds & The Fed on the US Dollar?

The April minutes on Wednesday afternoon provided fuel for the May trend to continue aggressively. After the meeting, the probability of a rate hiked in June jumped to 23% after sitting at less than 5% probability earlier in the week.

Recently, we’ve seen an unusual environment where the Federal Reserve Presidents try to be convincing the market that they’re serious about two rate hikes in 2016. Earlier this week, the probability of a June Rate Increase per Bloomberg sat at a measly 4% probability the first “price-in” hike, not until December.

Today, that number has moved up to as high as 16% and could continue to rise into the June Meeting, which inconveniently lands a little more than a week before the EU Referendum. On Tuesday, Dallas Federal Reserve President Robert Kaplan noted that the EU Referendum would play into the Fed’s decision on rates in June.

After, the stalwart showing from the American Consumer last week, we’ve continue to see the US Dollar sit near the highs 8-week highs. The seasonality has favored US Dollar strength, and so far, that appears to be aligning with the May 2015 lift-off in the US Dollar. However, the burden of proof for correct market view currently lays on US Dollar Bulls, which may now include the Fed. The US data will continue to be filtered through the lenses of the recent April FOMC minutes, however, if the data doesn’t pick up significantly, it seems unlike that the Fed would try and shock the market awake with a rate hike just to show they were serious. Especially, as Kaplan noted, ahead of a significant potential risk like ‘Brexit.'

Hedge Funds Still Hate the US Dollar, And That’s Starting To Hurt

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

The above chart shows a little over a year’s worth of price data on the US Dollar Index. Earlier, I shared that one of the valuable technical tricks I’ve picked up over the years was to keep an eye on the price range of an extreme day for a potential pivot in price. The bottom rectangle shows the price range for the May 14, 2015, low, with a price range of 11,680/34. Looking to the far right of the chart, you’ll see that we came to that price range while within the corrective channel (red) and then aggressively moved higher by ~2.65% or 309 points on the index.

One thing the chart doesn’t show you is that the amount of Dollar bears among hedge funds sit near 52-week lows. To me, this means the breakout risk is high if the Fed continues to rattle their rate-hike stick at the market and hedge funds are forced to cover their short trade by buying. Here’s a helpful chart put together by Jamie Saettele that shows ~10 years of positioning in the US Dollar Futures market (DXY), and the red line on the bottom shows you net positioning by institutional speculators:

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

Swing US Dollar Chart Favors Focus on April Pivots of 11,953 & 11,907

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

In the chart above, you’ll note that the top line of the bearish channel has been broken. Given the seasonal tendencies, this is undeniably bullish. However, we still sit under important resistance that you should keep on watch.

First, for good measure, I drew a 25% extension sliding parallel off the upper parallel line of the 3-month channel that has held price so well. The sliding parallel sits right below the current monthly high of 11,956 and the 50% retracement of the February-May range at 11,945. The significant resistance that if broken would open the door to new highs is 12,001, which was the February Opening Range low.

Since we’ve now taken out the April highs that we mentioned in the last technical note, support is of less interest to us than resistance as the wind may be at the Bull’s back. ST support is currently the weekly opening range low of 11,893, which was a double-tapped level on Tuesday before pushing higher into the FOMC Minutes release.

Should the weekly low break, there is a confluence of significance at 11,850/55. 11,850 is the 38.2% of the May Range, and should be the first focus of any trend set-back. 11,855 is the May 11 low that was the first setback above the 21-DMA, also near 11,850 that eventually gave way to a 100+ move higher.

The Dollar Is Strong But Pick Your Poison Wisely

The strong move in May that we warned about has shown up in force, and if 2015 is any guide, we could continue in this move for months. However, the index is sitting below important resistance, and until the level of 12,001 breaks, it is hard to take this rally too seriously, yet.

Shorter-Term US Dollar Technical Levels

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

Interested In our Analyst’s Longer-Term Dollar Outlook? Please sign up for our free dollar guide here.

T.Y.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.