Dollar bull case stronger than ever. Target: 100.30
I've been an unrelenting dollar bull (for better, and for worse) since two summers ago. The thesis has broadly been predicated on three things: (1) ECB QE (2) anticipation of Fed rate hikes and (3) a massive falling wedge pattern. While it has taken much longer than anticipated for the ECB to finally ease, and while we still have yet to see the Fed raise rates, an ever larger macro theme has emerged. This phenomenon is the force of monetary policy divergence, where the world is easing and the Fed is well, not easing. The world's central banks will force the dollar higher, nearly regardless of what the Fed does or doesn't do.
From the technical perspective, soon after Mario Draghi announced ECB QE, the dollar's rally began to consolidate into a very well defined falling wedge. The likely outcome of this technical pattern is a continuation of the prior trend, which is of course, higher. That said, since August, we've seen the pattern fail three separate times, bringing into question the validity of the pattern. Since the October lows, and with the support of Draghi and Yellen, we've seen the price action turn around and take out three significant levels. First, was the bearish trendline from the March highs. Second, was the bullish trendline from the May lows. Third, was the breach into my neutral zone b/w 97.19 and 97.77.
At current, momentum is firmly in the bullish corner. Subsequent closes above 98.00 and 100.00 are essential to confirm a breakout to new highs. Remember, the anticipation of rate hikes is much more supportive of a higher dollar than an actual hike. So I'd expect to see the dollar test the 100 level ahead of the December FOMC meeting. In the meantime, I will be buying the dollar dips!
From the technical perspective, soon after Mario Draghi announced ECB QE, the dollar's rally began to consolidate into a very well defined falling wedge. The likely outcome of this technical pattern is a continuation of the prior trend, which is of course, higher. That said, since August, we've seen the pattern fail three separate times, bringing into question the validity of the pattern. Since the October lows, and with the support of Draghi and Yellen, we've seen the price action turn around and take out three significant levels. First, was the bearish trendline from the March highs. Second, was the bullish trendline from the May lows. Third, was the breach into my neutral zone b/w 97.19 and 97.77.
At current, momentum is firmly in the bullish corner. Subsequent closes above 98.00 and 100.00 are essential to confirm a breakout to new highs. Remember, the anticipation of rate hikes is much more supportive of a higher dollar than an actual hike. So I'd expect to see the dollar test the 100 level ahead of the December FOMC meeting. In the meantime, I will be buying the dollar dips!