In the medium to long term, we envisage a weaker dollar index as the last Federal press conference rings a clear dovish remark and additional (not necessarily) helpful comments from other FOMC members may have solidify that Yellen wants a weaker dollar for now.
However, we will remind readers once again nothing moves in a straight line and should not be surprised to see a bounce as dollar range trade in the symmetrical . With that in mind, several scenarios may well happen:
- to take a back seat and look to build strong
- Stocks sell off and this could be the catalyst for further selling
- in mind that dollar index is very much Data dependant and Greek Deal or No Deal
- As Greece goes down to the wire, safe haven buy to the dollar may continue next week
- Once deal is done, the corrective rally in the dollar is done with a potential upside capped by the 20
- Looking further, an AB = CD pattern will play out (assuming the 20 did act as resistance followed by a rather major sell off in the dollar index
So look for the rally and wait patiently to open a short position as we approach the end of next week.
Key price to watch are - 20 / 95.32 and 93.13