The Dollar Outlook Is … Bullish?
The Dollar Outlook Is Bullish With A Heavy Dose Of Caution
If one thing is certain, the past say eight weeks have been especially tough to trade. The markets have been incredibly sensitive to news, news of any kind, and whipsaw has been the name of the game. When it comes to the dollar, I can say the Dollar Index and pairs derived from it have been behaving more or less in line with technical principals despite the higher volatility. What I mean is, while it has been difficult to forecast the index movement on a day to day basis the big swings and reversals usually happen at accepted and recognized points of support and resistance.
The Dollar Index – Moving Up From A Bottom
In the technical sense, the Dollar Index is moving up from a bottom. This bottom begins at the $98.50 level but support is more accurately described as along the short-term EMA. Price action is forming a double-bottom, that’s a positive, and the move is supported by the indicators, another positive. The bad news is that resistance is just above today’s trading level and marks the baseline of the pattern. The baseline could be a strong point of resistance. If price action moves higher I think another rally could form to drive price up to the $103 level.
The EUR/USD – Bearish With A Side Of Support
The EUR/USD is moving lower within a downwardly-biased trading range. The indicators are consistent with a move lower but there is risk. Support is close at hand and may be found as high as the 1.07570 level. If price action can move below that there is a chance for the pair to fall another handle to the 1.06500 region. The driver of this trade is the EU’s decision on how to bail out its economy, if they pour on the juice as is expected this pair could fall to set a new low.
The GBP/USD – Consolidation Is About To End
The GBP/USD pair has been in consolidation for a couple of weeks now but that is about to end. The pair could go either way at this time but the bias is lower, dollar strong. I say the bias is lower because the indicators are both moving lower within their ranges while the pair trades below the moving average. Support is at the 1.2200 level, a move below there would be bearish. If such a move occurs this pair could fall to the 1.1400 level pretty fast.
