US Dollar Forecast; This Is A Make Or Break Moment For The Bulls

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US Dollar Forecast; This Is A Make Or Break Moment For The Bulls

The US Dollar Forecast Is Bullish

The U.S. dollar forecast is bullish. The index has been under pressure in recent weeks but that is over. The FOMCs new policy stance says no more cuts, the latest round of labor data supports that view, and he Dollar Index is showing signs of reversing. The chart is in the late stages

of a double-bottom reversal that could easily take the index back up to retest its recent highs. The indicators support this view in that 1) MACD confirms support at this level and 2) stochastic is doing the same. Both indicators are now set up to fire what I like to call the strong-buy signal, the only risk to traders is that is has not yet come.

What is the strong buy signal? It is a buy signal that forms when price action confirms a bottom and the indicators confirm the bottom at the same time. What happens is a drop to support, a bounce, and then another drop to support and second bounce. The second bounce is usually higher, starting from a higher price-point, but not always as is the case here. Here we have a double-bottom in process, possibly. What makes this such an attractive possibility is the indicators. The confirm support by diverging from the second low. If the market were heading lower it is likely MACD and stochastic would have created deeper peaks than they did.

The trick now is waiting for the confirmation. A move up from this level is the first indication a reversal is in progress but not the best. If the move up is confirmed by bullish crossovers in the indicators that’s better but still not the best signal. The best signal will be when the DXY moves up to the $98 level and break above resistance. Resistance is in the form of the short-term moving average but, more importantly, the baseline of the double-bottom that is possibly in play. A move above that level would confirm a full reversal.

A look at the EUR/USD highlights the potential for reversal. The EUR/USD is forming a potential double-top that is virtually the exact reflection of the DXY. The pattern’s top is resistance just above 1.1155 and noticeably lower than the previously broken support. The indicators are likewise diverging from the new peak and indicate an underlying weakness in the market. The divergence may not result in a reversal for this pair but the outlook is not good. A fall from current levels would confirm the top, a move below 1.10775 would confirm reversal.

US Dollar Weekly Technical Forecast: Can USD Bulls Post a Breakout?

US DOLLAR TALKING POINTS:

Retail Bets Against a USD Breakout via EUR/USD, GBP/USD

Retail traders appear to be looking for USD-weakness to show in Q2, as IG Client Sentiment is currently showing heavy long positioning in both EUR / USD and GBP / USD . Retail sentiment is traditionally a contrarian type of indicator, and this can keep focus on the bullish backdrop around the US Dollar as the quarter’s first major rate decision is on the economic calendar for next week with Thursday’s ECB meeting.

Do you want to see how retail traders are currently positioned around the US Dollar ? Check out our IG Client Sentiment Indicator .

This was the driver last month that really seemed to prod USD-bulls, creating a swell of strength until the US Dollar tested the yearly-high at 97.71 . But, that resistance came into play just hours after the ECB announcement; and the following morning brought an abysmal NFP report that saw that theme of USD-strength further reverse – and that remained into the FOMC rate decision on March 20 th . The Fed went dovish by cutting forecasts for rate hikes in 2020, and that brought a quick continuation of weakness in the Greenback as prices pushed down to trend-line support. But – buyers were able to hold the lows, and in the two-and-a-half weeks since, have largely remained in-control of USD price action .

US Dollar Four-Hour Price Chart

Chart prepared by James Stanley

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As discussed in the Q2 technical forecast on the US Dollar , the currency has built into an ascending triangle formation, and this will often be approached in a bullish manner. The expectation is that the motivation that’s continued to bring in bulls at higher-lows, similar to what was seen in the aftermath of the March FOMC rate decision, will continue until resistance is eventually taken-out. This is one of the primary reasons for the bullish forecast on the US Dollar for Q2, and this potential remains until that formation is invalidated, which would take place upon a drop below March support around 95.74.

US Dollar Daily Price Chart

Chart prepared by James Stanley

US Dollar Forecast for Next Week: Neutral

While longer-term bullish potential remains around the US Dollar, this may not be the most opportune time to try to anticipate that breakout. At this point, given the rigidity of that resistance, USD is likely going to need some type of catalyst to create enough motivation for buyers to finally break through to the other side. Perhaps ECB is that catalyst; but given that the bank already triggered a fresh round of stimulus while cutting both growth and inflation forecasts, there may not be much more that they can do to create a bearish push in EURUSD, which could then create bullish breakout potential in the US Dollar. Or maybe it ends up being fears of a No-Deal Brexit that creates that swell of strength in the US Dollar as Cable traders punish GBP for another increase in uncertainty.

Whatever the root cause: Bullish breakouts above 97.71 in DXY can re-open the door for topside strategies in the US currency. But, until then, traders should remain on guard.

US Dollar Four-Hour Price Chart

Chart prepared by James Stanley

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q 1 have a section for each major currency, and we also offer a plethora of resources on USD -pairs such as EUR/USD , GBP/USD , USD/JPY , AUD/USD . Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator .

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley , Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Ethereum price analysis: Make or break; is the bulls approach

The market is still sinking in the sea of red while the bulls’ attempts to correct higher are thwarted by selling pressure. The drop from $208 billion to $202 billion has left the buyers barely gasping for air. Ethereum, the 2 nd largest cryptocurrency in the market in the world broke the levels above $200 to trade lows around $195. Moreover, the $20 billion crypto has recorded a decline in the daily trading volume from $1.5 billion to the current $1.3 billion in the last couple of days.

In the interim, Ethereum is trading at $195.7, although it is confined in a range with the upper resistance limit $197. The declines a couple of days ago saw byers seek refuge around $195 preventing a slide the former support at $195. Ethereum has been unable to correct above the range resistance, besides, both the 50 SMA (15’ chart) and the descending trendline are capping gains immediately to the upside.

The signals from technical indicators are positive but at this moment, buyers require a catalyst in order to break free from the resistance. If buyers can sustain growth above $197 ETH/USD will be primed for gains above $200. However, the ranging RSI means that the stability will continue in the near-term.

The MACD, on the other hand, has sustained growth towards the mean line. Crossing over into the positive region will affirm the bulls presence in the market. For the buyers a break above the range is essential but defending the support at $195 keeps the bears at bay. Meanwhile, the support at $190 will come in handy; there is another support at $170 (primary support).

USD/JPY Analysis: bulls looking for a break above 106.65

USD/JPY Current price: 106.42

  • Improved market’s sentiment weighing on safe-haven Yen.
  • US Michigan Consumer Sentiment Index for August expected at 97.2.
  • USD/JPY neutral-to-bullish in the short-term, downside well limited.

The market is heading into the weekend in a better mood, as US President Trump spoke about “productive” trade talks with China, calming speculative interest. Also, robust US Retail Sales released Thursday spooked, at least temporarily, the ghost of recession.

The USD/JPY pair is advancing beyond the 106.00 level, underpinned by recovering equities. Currently trading in the 106.40 region, the upside is capped as, despite yields bounced too, the advance there is quite modest.

Japan didn’t release relevant data at the beginning of the day. The US, on the other hand, will release July Housing Starts and Building Permits, and the more relevant preliminary Michigan Consumer Sentiment Index for August, seen at 97.2 from 98.4 in July.

USD/JPY short-term technical outlook

The USD/JPY is still being capped by the 38.2% retracement of its latest daily decline at 106.65, the immediate resistance. In the 4 hours chart, it´s holding above a bullish 20 SMA, which now converges with the 23.6% retracement of the same decline. The RSI indicator in the mentioned time-frame advances above its mid-line, currently at 58, although the Momentum indicator is still struggling with its mid-line, unable to confirm an upward extension. Beyond the mentioned Fibonacci level, the 100 SMA and the weekly high at around 107.00 provide the next resistance and a possible bullish target, should the recovery continue.

Support levels: 106.05 105.60 105.25

Resistance levels: 106.65 107.00 107.40

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