Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UKGC Set to Make Online Gambling Industry More Risk-Free - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Blaming the Fed for Weaker Greenback US Dollar

Currencies / US Dollar Mar 23, 2018 - 02:05 PM GMT

By: Nadia_Simmons

Currencies

Although the Federal Reserve raised interest rates yesterday, the forecast for two more hikes this year (instead of three) disappointed market participants who turned their backs on the U.S. dollar, triggering quite sharp selloff. But did anything really change in the technical picture of the greenback?

Before we analyze our currency pairs, let’s check what changed (and what has not changed) in the short-term picture of the USD Index after yesterday’s news (chart courtesy of http://stockcharts.com).


USD Index in Focus

Looking at the daily chart, we see that the USD Index bounced off the blue support zone in the previous week and closed Tuesday’s session above the previously-broken lower border of the black declining trend channel and the 50-day moving average.

Although this was a positive event, we were a bit skeptical about this improvement, because this was nothing more than what we already saw in the previous weeks. When we take a closer look at the daily chart, we see that very similar situation took place at the end of February and also at the beginning of March. In both previous cases, the index didn’t climb above the moving average, but yesterday’s price action clearly shows that history repeated itself once again despite this tiny improvement.

So, what’s next for the USD Index? Taking all the above into account and combining it with the fact that the blue support zone continues to keep declines in check, we believe that what we wrote a week ago is up-to-date also today:

(…) the USD Index stuck between the support zone and the resistance line.

Since the beginning of the month, the index is trading in a narrow range between the lower border of the black declining trend channel and the blue support zone based on the late January highs, late February lows and two Fibonacci retracements (the 50% and 61.8%). This means that as long as there is no breakout above the March peak or a breakdown under the blue zone another bigger move is not likely to be seen and short-lived moves in both directions should not surprise us.

However, what could happen if we see a breakout or a breakdown?

Let’s consider both scenarios.

If currency bulls win, and the index climbs above the March peak, we’ll see an upward move to the upper border of the black declining trend channel (…) in the following days. Such price action would likely translate into a test of the early January highs in EUR/USD.

On the other hand, if currency bears push the index under the blue support zone, we’ll see a re-test of the green support zone created not only by the January and February lows, but also by the 50% and 61.8% Fibonacci retracements (we wrote about this area in our article posted on February 23, 2018).

Having said the above, let’s examine the current situation in EUR/USD and AUD/USD.

Conflicting Signals and EUR/USD

Yesterday, we wrote that taking into account the current position of the daily indicators (they suggest that the euro will extend gains against the greenback) and uncertainty around today’s Federal Reserve's monthly policy decision, we decided not to open short positions.

From today’s point of view, we see that yesterday’s decision was a good choice as EUR/USD bounced off session’s low and invalidated the earlier breakdown under the blue support line (the neck line of the head and shoulders formation). Thanks to this improvement the exchange rate came back to the north and re-tested the strength of the black declining resistance line based on the previous highs.

As you see, this nearest resistance stopped the buyers, triggering a pullback and an invalidation of the tiny breakout earlier today. This is a negative event, which suggests a drop to the blue line or even a decline to the green support zone (created by the 38.2% Fibonacci retracement and the March low and reinforced by the medium-term black rising support line based on the November and December lows) in the following days.

Nevertheless, as long as there is no breakdown below these supports (and the breakout above the March peak in the USD Index), a bigger move to the downside is not likely to be seen – specially when we factor in the fact that EUR/USD is still trading in the blue consolidation seen on the weekly chart below.

AUD/USD – Rebound or Trap?

A week ago, we wrote the following:

(…) currency bulls tried to push the pair higher yesterday, but their efforts failed, and their opponents created a candle with an elongated upper shadow, which (…) in combination with the sell signals generated by the indicators (…) suggests that we’ll see
(…) declines from here (…)

Looking at the daily chart, we see that the situation developed in tune with our assumptions and AUD/USD moved sharply lower, reaching the 70.7% Fibonacci retracement and approaching the lower border of the blue declining trend channel yesterday.

Although this support area encouraged currency bulls to act, resulting in a quite sharp rebound on Wednesday, the pair reversed earlier today, which suggests that a re-test of the last low (or even a drop to the support area created by the 76.4%, 78.6% Fibonacci retracements and the lower line of the blue trend channel) can’t be ruled out.

This scenario is also reinforced by the above-mentioned current situation in the USD Index as the greenback reached the blue support zone once again, which suggests another rebound in the following day(s).

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Oil Trading Alerts as well as Gold & Silver Trading Alerts. Sign up now.

Nadia Simmons
Forex & Oil Trading Strategist
Przemyslaw Radomski
Founder, Editor-in-chief

Sunshine Profits: Gold & Silver, Forex, Bitcoin, Crude Oil & Stocks
Stay updated: sign up for our free mailing list today

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules