Greenback Seen Approaching a Critical Technical Juncture
Week to date, the US dollar added 0.6% according to the US Dollar Index. Month to date, gains for the index has also eclipsed January’s losses, up 1.5% and on track to snap a four-month bearish phase.
Although clipping the lower boundary of the monthly decision point at 101.30-103.91, this unearths a potential dip-buying scenario in a market trending north since early 2008. An obvious upside objective residing on the monthly scale, one that offered sellers a technical ceiling to work with in Q4 of 2022, is the ascending channel, taken from the high 103.82. Failure to build on recent gains, nonetheless, reopens the risk of a return to monthly Quasimodo resistance-turned potential support from 99.67, closely shadowed by two Fibonacci ratios just south of 100.00.
Against the backdrop of monthly price action, the immediate test for bulls in this market is the descending channel resistance on the daily timeframe, extended from the high 107.99. Adding to this, the daily Quasimodo support-turned resistance at 103.76 is in view that is aided by resistance out of the Relative Strength Index (RSI) between 60.00 and 50.00. As you can see, the neighbouring 50-day simple moving average at 103.48 failed to create much of a headwind last week. Assuming a break of the descending channel resistance this week, medium-term forecasts see the buck taking aim as far north as daily Quasimodo resistance from 104.86.
Trend structure on the daily chart, however, remains on the side of sellers for the time being, despite price closing north of the 50-day simple moving average. This is shown through the recent Death Cross. Fashioned through the 50-day simple moving average crossing under the 200-day simple moving average (106.46), this signals the potential for a major trend reversal (though this is a lagging indicator and reflects past price movement). In addition to this, since establishing a peak at 114.78 in late September, a series of lower lows and highs materialised (traditional bearish trend structure). It will only be once a decisive higher low occurs and a subsequent higher high would I consider the daily timeframe to be trending north—admittedly a push through the daily descending channel adds weight to a trend reversal to the upside.
Direction:
As a whole, I feel the greenback is approaching a critical technical juncture right now in the daily descending channel resistance. A rejection supports the daily chart’s bearish trend and could turn things in the direction of daily demand at 100.27-100.77; movement north, nevertheless, shines light on further buying on the monthly scale from the decision point at 101.30-103.91 with the possibility of daily resistance emerging around 104.86.
Although clipping the lower boundary of the monthly decision point at 101.30-103.91, this unearths a potential dip-buying scenario in a market trending north since early 2008. An obvious upside objective residing on the monthly scale, one that offered sellers a technical ceiling to work with in Q4 of 2022, is the ascending channel, taken from the high 103.82. Failure to build on recent gains, nonetheless, reopens the risk of a return to monthly Quasimodo resistance-turned potential support from 99.67, closely shadowed by two Fibonacci ratios just south of 100.00.
Against the backdrop of monthly price action, the immediate test for bulls in this market is the descending channel resistance on the daily timeframe, extended from the high 107.99. Adding to this, the daily Quasimodo support-turned resistance at 103.76 is in view that is aided by resistance out of the Relative Strength Index (RSI) between 60.00 and 50.00. As you can see, the neighbouring 50-day simple moving average at 103.48 failed to create much of a headwind last week. Assuming a break of the descending channel resistance this week, medium-term forecasts see the buck taking aim as far north as daily Quasimodo resistance from 104.86.
Trend structure on the daily chart, however, remains on the side of sellers for the time being, despite price closing north of the 50-day simple moving average. This is shown through the recent Death Cross. Fashioned through the 50-day simple moving average crossing under the 200-day simple moving average (106.46), this signals the potential for a major trend reversal (though this is a lagging indicator and reflects past price movement). In addition to this, since establishing a peak at 114.78 in late September, a series of lower lows and highs materialised (traditional bearish trend structure). It will only be once a decisive higher low occurs and a subsequent higher high would I consider the daily timeframe to be trending north—admittedly a push through the daily descending channel adds weight to a trend reversal to the upside.
Direction:
As a whole, I feel the greenback is approaching a critical technical juncture right now in the daily descending channel resistance. A rejection supports the daily chart’s bearish trend and could turn things in the direction of daily demand at 100.27-100.77; movement north, nevertheless, shines light on further buying on the monthly scale from the decision point at 101.30-103.91 with the possibility of daily resistance emerging around 104.86.
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