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Technical Outlook: US Dollar at a Tradable Low?

Technical Outlook: US Dollar at a Tradable Low?

2017-08-30 10:33:00
Paul Robinson, Strategist
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The primary focus in today’s discussion was on the reversal-day the US Dollar Index (DXY) put in at the bottom of long-term support. The trend has been extremely one-sided and various sentiment metrics have expressed this much. The data-flow hasn’t been supportive of a higher USD. All-in-all, this is setting the market up for an inflection point as the bad news is priced in, and again with the DXY at the low-end of a long-term support zone (back to ’98) there is reason to think shorts may soon be caught off guard. Yesterday’s reversal-bar was just one-day, but could be the start of a tradeable rebound. EURUSD put in key reversal bar after trading just beyond the 2012 low. GBPUSD also put in a nice reversal day on a retest of a recently broken trend-line. USDJPY found lots of sponsorship as not only did USD find broad buying but safe-haven YEN buyers fled as fear regarding North Korea abated. Generally speaking, from a risk/reward standpoint the trend in USD has reached a point where we can reasonably expect to see some type of low to form, if it hasn’t already.

Precious metals took a hit off their highs yesterday as North Korea fears diminished and USD traded strongly off its lows. Gold put in its own key reversal bar off the upper parallel of a channel which has been keeping it pointed higher for several weeks. This shifts the focus immediately lower, but as long as the lower parallel holds along with the double-tops from April/June, then gold will keep a more broadly bullish bias intact. Silver pulled back off the July 2016 trend-line, also shifting immediate focus lower. Like gold, the lower parallel matters. Keep an eye on USD and its influence moving forward.

The importance of trading psychology can’t be understated. Check out this beginner’s guide – Building Confidence in Trading.

Crude oil, as discussed yesterday, appears to be headed lower, and now that it not only broke a rising channel in place since June, but the key 47-level has been cleanly broken as well. Stay below 47 and sellers are in control.

We saw a snapback yesterday on the gap-down open in U.S. indices, which keeps them continuing to grind. Price action is in limbo right now. Looking at the Nasdaq 100, we have maybe the cleanest picture, with a bull-flag coming to shape. Still need some more time for confidence to build, but it’s a possibility on our radar. The DAX may find some help from a weak euro should we see the single-currency decline, but it has its work cut out for it on the upside. It remains the ‘go-to’ index for shorts. The FTSE 100 held the 7300-level after a minor breach yesterday. This keeps the outlook neutral.

For full technical considerations, please see the video above…

---Written by Paul Robinson, Market Analyst

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