- After correcting at the previous 2 year trend line and 200 day MVA, the dollar has found support at the 0.382 Fibonacci retracement . If you take a look back over the past couple years, this has been an area of pivotal support/resistance numerous times. I expect a bounce from this level to retest and possibly even break the previous trend line as long as the RSI remains bullish ( > 50).
- From a fundamental perspective, it could be assumed that the USD will be moving downward given the ultra dovish initial commentary from Yellen. This is definitely a risk, but considering all the voting FOMC members views on QE , there is more of a consensus that the taper should have already begun.
- Cyclical, with an insanely overbought equities market, I expect profit taking through the end of the year to further support the USD. As always this is only what I view as the most likely scenario. The alternative scenario should still see the DXY finding support at its most previous swing low.
- From a fundamental perspective, it could be assumed that the USD will be moving downward given the ultra dovish initial commentary from Yellen. This is definitely a risk, but considering all the voting FOMC members views on QE , there is more of a consensus that the taper should have already begun.
- Cyclical, with an insanely overbought equities market, I expect profit taking through the end of the year to further support the USD. As always this is only what I view as the most likely scenario. The alternative scenario should still see the DXY finding support at its most previous swing low.
Not only is divergence showing up on the RSI again along with the stochastic showing a correction is under way, but the correlation between the SPX and DXY appears to be reverting back to its normal inverse relationship. I highlighted a previous occurrence of this from a couple months ago with similar conditions that had some decent follow through.