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Trading Outlook: US Dollar Building Base at Big Support?

Trading Outlook: US Dollar Building Base at Big Support?

Paul Robinson,

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The US Dollar Index (DXY) is on track to put in a significant bullish bottoming formation, but does need a little more time before becoming a valid pattern. The ‘inverse head-and-shoulders’ would require that we soon see a turn back higher. Given this could take shape at a very significant support zone, the proposition of seeing this come to fruition becomes all the more intriguing. Starting back as far as 1998 the 9130/91.50-area has been highly influential at various times (most recently May 2016), and when you couple that with the underside trend-line from May 2015 you have a very strong spot to look for a broader recovery to take shape from. To reiterate, a ‘right shoulder’ does still need to be cemented and a confirmed break of the neckline around 94 before we can become too ‘bulled up’.

US Dollar Index (DXY):Daily

As the dominant currency in the DXY (~57 weighting), the euro is doing the opposite. The area from current levels up to 11910 is viewed as the ‘sweet spot’ to look for the single-currency to turn lower from.

GBPUSD has undergone a bounce thus far this week but could find it difficult to continue gaining traction above 13225. A turn lower will bring attention on confluence of a trend-line off the March low and lower parallel extending up from the April low.

These clock in just under 13000. USDJPY put in a nasty rejection bar on 10/5 following repeated failures to climb above a slope rising up from September 2016. There is good support around the 11160, and should it hold there and turn back higher it would be the first time this year we have seen a strong bounce not quickly resolve back lower.

AUDUSD and NZDUSD both look poised for further losses as they remain two of the weakest currencies in the dollar spectrum.

We looked a host of cross-rates including several JPY-related (GBPJPY, EURJPY, CHFJPY, NZDJPY), EURAUD, EURNZD, and USDMXN on the EM-front. (Cross-rate discussion begins at this point in the video.)

EURAUD: Daily (Rallying out of ascending wedge)

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(Commodities & Equity indices portion of the webinar starts here.)

Gold has its work cut out for it as 1296/1300 looms ahead. Looking for weakness to set in and a move back towards a confluence of support. Silver is also facing solid resistance in the low-17s, with renewed weakness to bring 16.07/13 into view. (See today’s precious metals technical outlook for details.)

The S&P 500 remains strong and more gains are seen as likely out of a small consolidation pattern. The DAX has a similar outlook, but keep an eye on long-term top-side trend-lines up to 13100. The CAC is poised to run higher out of a high-level base towards the May high at 5442. The FTSE is undergoing a big test at resistance between 7550/600. The Nikkei closed at its best levels since 1996, but still has to overcome its best intra-day levels set in 2015 at 20952.

DAX: Daily

For full technical considerations, please see the video above…

---Written by Paul Robinson, Market Analyst

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