USDOLLAR Top Down Analysis – 30 Nov
Weekly Timeframe
The below shows the weekly timeframe of FXCM's USDOLLAR basket. We have applied a triple moving average system to assess its trend. The green shorter-term moving average is above the mid-term orange moving average, and the mid-term orange moving average is above the longer red-term moving average. This is a bullish formation. The weekly stochastic is also above 80 (aqua arrow), which suggests underlying bullish momentum.
Past Performance: Past Performance is not an indicator of future results.
Daily Timeframe
The daily chart show's that the USDOLLAR has been under pressure since Friday (blue vertical). I.e., the greenback has reacted to the news of the new omicron variant by pulling back; the market questioning the Fed's tapering and rate hike schedule, given the new strain. In this regard, the US10Yr is currently at 1.43%, against Thursday's close of 1.63%.
Currently, the daily bullish formation is maintained. The green shorter-term moving average is above the mid-term orange moving average, and the mid-term orange moving average is above the longer red-term moving average. The correction normalised an overbought RSI (red rectangle) and the stochastic has maintained its bullish position near 80 (blue rectangle).
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Past Performance: Past Performance is not an indicator of future results.
Hourly Timeframe
The hourly USDOLLAR chart highlights the sharp sell-off as yields declined and the daily RSI normalised. The moving averages for this time frame are bearish. The shorter-term green is below the mid-term orange, and the mid-term orange is below the longer-term red. However, the hourly RSI is oversold (blue rectangle). This suggests that at current levels, the bears may not have a lot to work with.
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Past Performance: Past Performance is not an indicator of future results.
Conclusion
The weekly and daily charts remain in bullish formation. This is despite a pullback since Friday on the news of the omicron variant. The news has resulted in lower yields but normalised a frothy greenback. The hourly chart is oversold and may have a floor under it. It would not surprise us to see a rally develop to normalise the hourly time frame. Resistance areas will then be a key focal point. If they hold, the market will be attempting to correct the higher time frames. The analysis would then need to contend with the possibility that the current repricing may not be a correction but rather a change in previous expectations.
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Russell Shor
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.
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