With persistent resistance along the 76.60 to 76.70 area, the dollar’s rally has yet to convince me that there is a trend reversal underway.
The likelihood that the end of QE2 will suddenly reverse the dollar’s downtrend is a big assumption even with the surrounding fundamentals that are increasingly suggesting some Fed officials’ (Plosser, Fisher, and Bullard) hawkish talk could translate into a rate hike sooner rather than later. This week’s Friday NFP will go a long way to either proving or disproving that this is the right direction to take.
Earlier in Monday’s trading session, the dollar’s bullish sentiment looked promising for bulls expecting a daily chart trend reversal. The area between 77.00 and 77.30 will hold to key to that. Without a sustained rally above the 77.0 major psychological level, it’s difficult to justify any kind of rate hike discounting and a bullish dollar. In fact, the daily time frame continues to reflect that the dominant psychology, sentiment, momentum, and trend is still bearish. (see chart)
With the exception of the February 12-15 and March 10 rallies, the dollar has remain solidly bearish since slicing through the 34EMA Wave January 13.
The dollar’s resumption of the downtrend set ups a continuation in two swing entries: The swing buy in the EUR/USD and the swing short in the USD\/CHF.
The EUR/USD swing buy is very aggressive at the moment until or unless are more sizable correction lower to the 20 period SMA can occur (see the previous update “Watching for just one more pullback in the EUR/USD” at ) The current support is at the 38.2% Fibonacci Retracement level from the March 11 to March 22 rally. (see chart)
The USD\/CHF is sinking back below 0.9200 once again signaling that the bears are back in control for now. But the bulls have left their mark as the market trend is no longer the downtrend is once was. Getting below the “00” was the first hurdle for sellers, the next will be the 20 period SMA on the daily chart. (see chart)
While both swing entries remain valid, the USD/CHF is potentially a transitional market that could be entering a more sideways trading range so while there is room for a move to the downside, expect that sideways congestion and further volatility could be the new normal. For more commentary on my trades in these two pairs as well as my take on the U.S. Dollar visit my blog. There are a number of fundamental stories that could play out this week as Friday’s Non-Farm Payroll quickly approaches.
Similar Posts:
- Daily Forex Analysis – June 29, 2011
- Daily Chart Art – January 9, 2012
- Daily Forex Update: USD/CHF
- Daily Chart Art – February 22, 2012
- Daily Chart Art – March 27, 2012
