steve.jarvis's picture

A return to strength for the US Dollar, or a false dawn?

The US Dollar went from top to almost bottom of our rankings between during April & May, but over the past month has moved steadily back up the rankings.  The question is, are these latest gains the start of another sustained advance for the US Dollar, or merely a corrective recovery as part of an overall top pattern starting to be traced out?

To have a better idea of which it will be, one needs to look at the US Dollar against a wide range of other major currencies.  It's trend still looks very strong against the NZD, then the AUD, NOK & CAD, followed by JPY.  But the USD trend is less clear against the EUR, SEK, GBP & CHF and in all of these cases it may take another couple of weeks before the medium-term outlook is resolved.  In it's favour is that the long-term moving averages are all still pointed upwards with a potential higher low on MACD.  

Over the short-term, there are signs of a setback for the USD.  The speed and extent of this will be key to the multi-week outlook.  At present, the current weakness looks corrective in nature, ahead of the formation of a higher low over the coming week or two, setting up a renewed advance.  However, things don't always go to plan.  Given the overbought nature of some of the USD charts, we are wary to the possibility of a broader USD retreat lasting a number of weeks, ahead of an eventual return to underlying strength.

If you would like to keep up to date with Tradermade's views on the US Dollar, the best way is to take a FREE TRIAL of our award-winning FX Analysis service.  For a live sample page (the featured market is changed most days) please see where there are links to request your free 1 week trial (alternatively)