USDOLLAR Weekly Trend
The chart below shows FXCM's dollar basket, USDOLLAR. First, price indicates a series of higher troughs followed by higher peaks, which is the classical definition of an uptrend. Next, we assess if the candle ending 11 Feb is the next higher trough in the series (HT?). To this end, last week's candle (green arrow) did not close above the aqua horizontal, which is our requirement for a swing low. Moreover, its candle is a spinning top that denotes uncertainty amongst market participants.
USDOLLAR Daily Zone Analysis
The daily USDOLLAR chart shows prices oscillating around the lower blue band. This border is the dividing line between neutrality and bearishness. For the weekly to chart a higher trough, the daily chart must stay between the blue bands, i.e., the neutral zone. This support will allow the greenback to possibly consolidate before the longer-term trend stimuli potentially increase the price. Of course, a decline to the bearish area between the lower blue and red bands will negatively impact the "HT?" scenario.
Rate Hike and Ukraine-Russia Standoff
The greenback's safe-haven status makes it a vital instrument to consider given the tensions on the Ukraine - Russia border. In this regard, President Biden has accepted "in principle" to meet with President Putin as potentially a last-ditch effort at diplomacy. This meeting would occur after the scheduled appointment later in the week between Secretary of State Antony Blinken and Foreign Minister Sergey Lavrov.
Moreover, speculation is rising regarding a potential 50 bps hike on 16 March by the Fed. Data points are still running hot, with core retail printing at 3.3% vs. the 1.5 expected m-o-m; and core CPI beating at 0.6% vs. 0.5% m-o-m. These have led to an increase in expectations for the Q1 GDP number.
The geopolitical risks and potential for stronger than initially anticipated contractionary policy suggest that the "HT?" scenario is still very much a possibility. As such, we continue to monitor.
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.