US dollar likely to resume its bear trend


Jason Sen

The US Dollar Index has rejected longer-term resistance after the recent rally and is expected to turn lower, to resume this year’s bear trend. Failure to break back above the 94.00/90 Fibonacci resistance on the longer-term chart sees the price dip back to the blue 100-day moving average, but we look likely to test the three-month trendline support at 92.10. A break below is as a sell signal and confirmation that the next leg lower in the bear trend has commenced.

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We will examine some of the US dollar pairs to see how they line up against this weaker dollar theory.

AUD/USD bottomed exactly at two-year trendline support at 7500/7490 for a bounce to quite strong resistance in the 7650/90 area. Eventually a break higher is expected (perhaps not until next week) targeting 7740/50 and 7800/7810.

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NZD/USD beat strong resistance at 6935/65, to complete a bullish inverse head-and-shoulders pattern for a buy signal. We have reached our first target of 7025/35. We need to beat 7045/50, and should do eventually, to target 7075/80 then 7100/7110.

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USD/JPY tops just below the most important two-and-a-half-year downward sloping trendline at 114.05/20. The pair is lower as expected to all targets as far as 112.66/62. A break below 112.30 is expected eventually, for a negative signal targeting 112.05/00 and support at 111.90/70. But the outlook remains negative.

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EUR/USD bottomed well above six-month trendline and 23.6% Fibonacci support at 1.169080. This year’s bull trend is now expected to resume. The move back above resistance at 1.1800/10 is a short-term buy signal targeting minor resistance at 1.1865/70, then 1.1890/1.1900 and 1.1940/50.

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The USD/CAD outlook is negative as long as we hold below 50% Fibonacci at the 1.2906/16 high. This has held for six weeks. Bulls need to clear the 200-day moving average at 1.2945/50 to be back in control.

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The pair tests minor support at 1.2790/80 but risks are increasing to the downside. Further losses target 1.2760/55 and minor support at 1.2730/25. A break below 1.2700 targets 1.2655/45.

Spot silver bounced from very important longer-term trendline support at 1590/80 to reach the first target and resistance at 1603/06. On further gains look for 1617/18 and strong resistance at 1622/25. Although we should struggle here initially, further gains eventually target 1640 and strong short-term resistance at 1660/65.

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Jason Sen

Technical Analyst & Trader

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