Prices: A Week In A Day

Dollar Index  

The Dollar Index saw the biggest intraday range in over a year ahead of the weekend as it recorded a large downside reversal. In the jargon of technical analysis, a downside reversal occurs when the instrument takes out the previous day's high and then sells off through the previous day's low and closing below that low. Follow-through selling is needed to validate the pattern. The sell-off took the Dollar Index toward the (61.8%) retracement of the rally from the last significant low (late June near 95.85) that is seen near 97.00 and the 200-day moving average (~96.90). The RSI and Slow Stochastics are moving lower, while the MACDs have yet to turn. 


 The upside reversal in the euro was more dramatic. While the Dollar Index held the week's high before reversing lower, the euro recorded new three-week lows (~$1.1050) before rallying a cent to just above $1.1150. This is also the (50%) retracement of the decline since August 6 high only through $1.1250. The $1.1165 area is the (38.2%) retracement of the decline from the last June high (~$1.1400). The technical indicators look supportive, and the Slow Stochastics can turn higher in the coming days. Still, with the ECB still preparing fresh stimulus, speculators may look for a less encumbered currency to express dollar negativity. A move above $1.1250 is needed to suggest anything of significance.  


The dollar reversed lower against the yen after making a new high for the week (~JPY106.75) and fell to a nine-session low (~JPY105.25). The JPY105-level held earlier this month amid talk pension fund dollar purchases. Technically, a break leaves little support ahead of JPY100.00. Despite talk of the hunger for yield, the yen is the best performing major currency this year, appreciating 4% against the US dollar, 7% against the yuan, and nearly 9% against the South Korean won. The technical tone is weak, suggesting penetration of JPY105 is possible, but it may not initially be sustained. 


Sterling rose for the second consecutive week against the dollar for the first time in four months. It has risen by nearly 2% over the two weeks.It neared $1.23 ahead of the weekend, which is the (50%) retracement of the decline from the last important high in mid-July (~$1.2580). The next immediate objective is near $1.2365, but the measuring objective of the potential head and shoulders bottoming pattern projects toward $1.2450. The five-day moving average has crossed above the 20-day moving average for the first time since July 1. The technical indicators have accelerated to the upside, and a close below $1.22 would be disappointing.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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