Double Bottom Is Confirmed, A Retest Of Highs Is At Hand
The FOMC have done their work. The committed said it won’t raise or lower rates without a significant change in inflation and that is underpinning dollar strength. The Dollar Index moved higher over the last week and didn’t just confirm the Double Bottom I’ve been watching, it blew right past the baseline and is on track to keep moving higher. In every case, the indicators I commonly follow are bullish. Price action is forming a series of White Soldiers, not really strong ones but solid nonetheless. The MACD momentum shows market strength is at a four-month high and getting stronger, as does the stochastic. The only worry is that stochastic is already inside “overbought” territory so there some risk resistance will cap gains.
The first target for resistance is near $98.50. This level may provide strong resistance to price movement but I don’t think strong enough to cap gains for long. Next week we are looking for reports on CPI and PPI, along with retail sales. Positive surprises there will tilt the balance of sentiment toward rising FOMC rates and that will aid the bulls advance. A break above $98.50 will likely move up to $99.25 and then $99.70.
The Canadian Dollar is losing ground to its southern neighbor. The USD/CAD is moving higher and aided in today’s action by weak labor from Canada. Today’s move breaks above another point of resistance and opens the door to a much larger advance. The next resistance target is close to 1.3350, a gain of 118 pips. The indicators are both bullish and on the rise, neither are in overbought territory just yet. This move has room to run.
The Australian Dollar is likewise looking week versus its green-backed cousin. The AUD/USD is poised to make a big decline after the pair confirmed resistance at the 0.6900 level. The candles and indicator suggest a significantly bearish move is about to unfold, a move that may take this pair down to 0.6700. The only thing standing in the way are support targets at 0.68115 and 0.6750. The risk here, and in the USD/CAD, is that U.S. economic data will come in weaker than expected. Consumer and producer level inflation has been very tame over the past few quarters so there is little expectation the numbers will show a “significant” change as the FOMC is looking for. Regardless, the near-term outlook is bullish. Keep the trades small, safe, covered by stops and have those take-profit targets ready in case bearish signals form near resistance or support.