US dollar may see a short-term correction
The US dollar has become overbought on the daily and weekly charts. In recent days it appears to be at least slowing its advance. We need a correction to ease these overbought conditions but a big drop looks very unlikely.
A dip below 102.80 on the US Dollar Index would be the first signal that a correction has started. We could then expect a test of the first support at 102.60/50.
As we expect the downside to be limited we could look for a buying opportunity at 101.90/101.80. A move here could ease overbought conditions on the daily chart over the next few days. Bulls may then be ready to step back in to support the positive trend.
However, a move below 101.50 would suggest further short-term losses, perhaps as far as strong support at 101.75/65. This should be a good buying opportunity if we fall this far. There’s a strong chance this would be the low for the short-term correction.
Focus on forex pairs
USD/JPY has rallied from a November low of 101.15 to a current December high of 118.66. We’ve registered gains every week of this six-week move higher. So we’re obviously severely overbought and a break below this week’s low so far at 116.50 would signal further losses towards 116.00/115.90 and then 115.25/15.
Again, the downside is likely to be limited. But if we fall as far as 114.75/55 this should present an excellent short-term buying opportunity.
EUR/USD could bounce to 1.0470/80 but I’m hoping we reach 1.0565/75 for a better selling opportunity. Making it as far as 1.0670/90 is unlikely, but if we do this should mark a high for the correction.
AUD/USD has first resistance to push through at 7290. If we can move higher, however, look for 7335/45. There’s a good chance this is as far as we can bounce so you could try short positions here.
On the other hand, if we do make it to strong resistance at 7400/7410, this would be a nice selling opportunity. We could then expect the bear trend to resume.
Technical Analyst & Trader
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