The USDOLLAR is proving to be resilient. Previously we wrote that the greenback had charted a head and shoulders top. However, the pattern has not been completed, with FXCM's USDOLLAR basket still trading above the neckline. Nevertheless, we continue to monitor for the breakdown as this will be a bearish development.
The top chart shows the USDOLLAR, between the bottom blue and red bands. This area is its bearish zone. The longer it stays here, the greater the likelihood of the neckline breaking down. The bottom chart considers the real rate in its neutral zone between the blue bands. If this falls into its bearish zone, the greenback will lose fundamental support, which may be the catalyst for the breakdown.
However, if it moves into its top channel and the USDOLLAR moves into its neutral area, the greenback's resilience will be set to continue. This scenario will be an interesting dynamic given the slowdown in the CPI last week, suggesting another twist to the inflation story.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.