Dollar has reached its goal-the chances of a correction are high

The growth of the US dollar, in our view, is close to the end. However paradoxical it may sound, looking at its dynamics over the past month and the general fundamental background around the US currency. The grounds for stopping growth are technical rather than fundamental.

Divergences on the daily chart are becoming more and more frightening and obvious. The movement of prices and key technical indicators (RSI, MACD) is the opposite. History shows that such situations inevitably end with a corrective movement when the price is forced to turn around so that the indications of price dynamics and technical indicators are leveled. A confirming signal to this is finding the values of the indicators in the extreme zones, which is also a sign of the upcoming reversal. But most importantly, the dollar reached the upper boundary of the medium-term range (the value of the Dollar Index around 94). It is from the resistance 94 for the last year that the Dollar Index began correction and did it according to the most conservative estimates more than 5 times. The last time the assault on this mark was at the end of December 2017 and led to the fact that the dollar lost 3-4% of the value, and the Dollar Index fell to the lower boundary of the mid-term range to the area of 88.50.
Speaking about the fundamental background, while it is difficult to say that it will act as a trigger - everything was too good for the dollar in the last month. But this is precisely the main problem for its future growth. Markets are too used to the fundamental positive, and even more positive news are needed to nurture and stimulate growth. Therefore, any deviation from the norm, can lead to the disappointment of the markets and the start of correction. As reasons for the foreseeable future triggers in market sentiments, there may be: a shift in the attention of the market to the problem of the budget deficit and the current account deficit of the United States, the disruption of negotiations between the United States and North Korea, the intensification of trade wars, political scandals in the US (investigations about the presidential election are still under way) macroeconomic data from the US, reckless "pigeon" statements from one of the representatives of the Fed, etc. As you can see, there are many risk factors, so the current growth of the dollar is on a very shaky basis.

As for the main beneficiaries of the possible correction of the dollar, in our opinion, this is the euro and the British pound. It was the pairs EURUSD and GBPUSD that "suffered" most from the strengthening of the US currency. Correspondingly, the correction in them will be the most aggressive and acute.

Thus, although, in fact, it is a move against the trend and an attempt to foresee its reversal even before the beginning, we recommend buying EURUSD and GBPUSD. Goals in both cases are more than ambitious - a minimum of 400-500 points.