The Dollar Index has been sold through the 61.8% retracement (~100.40) of the rally since February 2 low near 99.25. If the 100-level is breached now, a return to the early February low, looks more likely.
That 99.25 area is very important from a technical perspective. It corresponds to a 38.2% retracement of the rally since last May's low and it is also a neckline of the old head and shoulders pattern. The measuring objective of the head and shoulders pattern is near 94.75, which is just above the 61.8% retracement of the rally since last May's low. The five-day moving average is below the 20-day average for the first time in a month. Technical indicators are also aligned favoring the downside.
The euro appears set to test the early February high near $1.0830, which also corresponds to the 50% retracement of the losses since the US election (~$1.0820). The spike from the December ECB meeting was near $1.0875. The 61.8% retracement of losses since the US election is roughly $1.0935. Technical indicators favor additional gains, though the proximity of the upper Bollinger Band (~$1.0750) may deter new aggressive buying before a pullback.
The euro's five- and 20-day moving averages crossed after the US jobs data, but the dollar's moving averages against the yen are only now set to cross. As often is the case, the dollar-yen rate is in a range. The JPY115 area marks the upper end of the two-month trading range. The lower end is near JPY111.60. The technical indicators are consistent with a test on the lower end of the range. If that fails to hold, the next target would be JPY110.
Sterling recovered smartly off the $1.21 area tested at the start of the week and finished the week near $1.24, which is the 50% retracement of its decline since February 2. A move above there would test the down trendline drawn off that February high and the high late in the month (~$1.2570). It begins the new week around $1.2430. The 61.8% retracement is near $1.2480. The five- and 20-day moving averages are set to cross in the coming days. The technical indicators warn against picking a top.... ...MORE
Saturday, March 18, 2017
"Dollar's Technical Tone has Deteriorated"
From Marc to Market: