USD: Shift In Technicals Backed By Cycle

The pieces of the puzzle as it relates to both technicals and cycle analysis appear to be coming together. Keep reading if you'd like to find out why we may be on the cusp of a cyclical shift in the US Dollar performance. Are we entering a new phase of US Dollar strength set to last months? In this report, I lay out the case that one can make...

Break down on the US Dollar index

The USD equally-weighted index has broken past its month-long range area. This type of price action must be closely monitored heading into Friday as going forward it may represent a major inflection point and shift in behavior for both the US Dollar and as a consequence, in the overall volatility of the Forex market.

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The chart below illustrates the narrow consolidation the US Dollar has been subject to since the sharp decline back in May. Ever since, that depreciation in the value of the US Dollar led to a period of waxing and waning with neutrality in positioning and market makers dominating proceedings at the edges.

The market, ever since, has clearly pin ponged between a huge line of support and overhead resistance. But as the last daily candle close shows, such dynamic has now changed (judging by the daily price action) as sellers no longer engaged at the resistance on the back of the first higher low for the USD in months.

(Click on image to enlarge)

By drilling down into the granularity of session by session flows, as illustrated below, one can also find further evidence of this bullish shift occurring by the rotation to bullish territory in my prop metrics designed to measure the structural backdrop and the underlying momentum. They all align to the bullish side now.

(Click on image to enlarge)

The question in everyone’s mind now is. Can the US Dollar maintain these gains heading into the weekend? Much of the improvement in outlook and its sustainability in the short run will depend on the outcome of the US payrolls (22:30 AEST) where the consensus is for 664k net jobs.

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The Daily Edge is authored by Ivan Delgado, Head of Market Research at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth ...

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