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US DOLLAR Technical Analysis: Dollar Bid on Jackson Hole Hope

US DOLLAR Technical Analysis: Dollar Bid on Jackson Hole Hope

Tyler Yell, CMT, Currency Strategist


Talking Points:

  • US Dollar Technical Strategy: Staying Below 12000 Resistance Favors Short Bias
  • Volatility Perking Up In Anticipation of Jackson Hole, Market Appears Split on Outcome
  • Dollar Pushing Marginally Higher vs. EUR, JPY as GBP outperforms across the Board

Access Our Free Q3 Dollar Outlook As The Fed Appears Cornered Regarding Effective Monetary Policy

Jackson Hole has become a key focus for Fed Watchers and USD traders. This Friday, Janet Yellen will speak at 10:00 am ET to discuss, ‘The Federal Reserve’s Monetary Toolkit.’ There will not be Q&A, which is a shame because a lot of details can be squeezed from answers to the media’s questions. However, many traders will be asking one question as they digest the main ideas from the speech:

Is the cheap USD free-ride going to last longer than anticipated encouraging a further pile into emerging markets and high-yield assets or is the parade about done with the reference rate set to rise multiple times over the near future?

Granted, many will likely not ask that question to the word, but the main question many investors have is whether or not the strategy of not encouraging USD strength will continue or whether or not we will see an about face that encourages the Fed to own up to a stronger Dollar that so many fund managers appear to be eagerly anticipating.

I would likely err on the side of Dollar weakness when the dust clears after Jackson Hole 2016. The title of this year’s conference is, “Designing Resilient Monetary Policy Frameworks for the Future.” Given the falling GDP around the world, it’s hard to imagine a policy framework of a strong US Dollar being conducive toward future growth.

For more on what should be watched in case we get a hawkish surprise, let’s go to the charts.

USDOLLAR Index Chart / Price Channel Favors Falling Resistance

The simple way to look at the chart above is to see that the slope of the lines that have guided price action since Q32015 are downward sloping. While there have been pockets of US Dollar strength in January after the rate high and again post-Brexit, the US Dollar Index has failed to find month over month gains with any consistency.

The simplified key levels that should be watched should US Dollar strength emerge is the 12,000/100 zone. A break higher from these levels would take the price of US Dollar Index above the channel resistance, and could be the first clear sign since Q12015 that a Dollar breakout environment has arrived. Absent such a breakout, the preference will remain to sell rallies.

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Strong/Weak View of G8 FX for Wednesday, August 24, 2016

Of the four counterparts for the US Dollar of the EUR, GBP, JPY, & AUD, the US Dollar has become the clear laggard. The GBP has pushed to 3-week highs on Wednesday morning, and even though the USD is seeing ST strength against the EUR & JPY, the larger tide seems set against a US Dollar rally.

Shorter-Term US Dollar Technical Levels for Wednesday, August 24, 2016

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 of trading.


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