US dollar bull trend resumes: so where next?
In last month’s articles we were looking for the end of the US dollar correction. Specifically we needed the US Dollar Index to bottom out in the 99.30 support area. This support worked perfectly as we bottomed at 99.23 in the first week of February and have climbed steadily higher since.
At the end of last week and beginning of this week we reached the most important resistance area at 100.70/101.00. We paused here waiting for yesterday’s FOMC comments and then the index pushed through this resistance area to begin the next leg of the recovery.
Once we are through the 101.70/80 area there is no reason why we can’t push on to the 102.60/102.90 area. We could then expect a re-test of that high made in January at 103.82.
We expected USD/JPY to bottom out around the 112.00/111.90 support area but in fact we overran as far as 111.57. We saw a battle for three or four days as the market managed to carve out a small base and we have begun the recovery over the past four sessions.
However, this recovery is not quite as well developed as that in the US Dollar Index. This is because we are currently held by important resistance at 114.40/114.60. I do eventually expect the pair to manage a break up through here and push on towards 115.15, 115.60 and 116.85/116.95.
There is really no reason why we cannot re-test the December/January high of 118.60/118.66 in the weeks ahead. In fact, I see no reason why we can’t break through that small double-top high later this year and push on as far as 119.70/120.00.
We expected EUR/USD to top at the 1.0820/30 Fibonacci resistance and again this level worked perfectly. In fact we topped exactly at 1.0828. If you look carefully at the daily chart below you can see the price never actually closed above the blue 100-day moving average line.
Since then we have returned through some minor support at 1.0640 to resume the longer-term bear trend. We meet some very minor support at 1.0530/1.0520 as we become oversold, but I don’t believe this is an area to try long positions.
Some short traders may wish to take some profit here. Eventually, though, I see no reason why we can’t break down through 1.0500 to target 1.0450. We may even reach the December January low at 1.0350/1.0340.
In fact, a break below this area in due course would not be a surprise. The pair should then target very strong support around the 1.0100 area.
Technical Analyst & Trader
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