DailyFX.com -

Talking Points:

- EURUSD, USDCHF in ST flags, ready for next moves in trend.

- GBPCAD, USDCAD near key resistance levels pre-breakouts.

- August forex seasonality in QE era supports a stronger US Dollar.

The US Dollar continues to strengthen independent of US yields. The greenback's recent pivot higher has been largely absent of help from its underlying yield complex, and a generally flatter yield curve over the last several months has weighed on the US Dollar as growth expectations floundered.

The chart below highlights this weak, positive correlation:

EUR/USD, USD/CHF Flag Before Next Move - GBP/CAD Up Next

Perhaps the disconnect is due to the flares of geopolitical risk across the globe. On one hand, stronger US labor market data and a Fed rate hike likely in July 2015 should be supporting a stronger US Dollar (check). On the other hand, geopolitical risk and mixed US inflation data should be supporting stronger US Treasuries (lower yields; check). There's a little something for everyone (that or I have no good explanation otherwise).

In line with the resiliency of the US Dollar (and her tracking index, the USDOLLAR Index), there are several non-indexed pairs that should be on the radar, primarily USDCAD and USDCHF. USDCAD's climb higher towards C$1.0955 also draws our attention to GBPCAD, which was nearing a critical breakout level near C$1.8475.

As pointed out in the video above, EURUSD and USDCHF seem to be flagging in tandem; I'll be watching both for confirmation (a notable divergence was in early-May, when EURUSD set new yearly highs but USDCHF did not set new yearly lows; a break in one flag should go with a break in the other).

Read more: USDOLLAR Breakout Valid Above 10495; AUD/USD Weak Under 0.9310

You May Also Like

COMPANIES IN THIS ARTICLE
Related Forex Analysis
  1. Forex News

    Crude Oil, Gold and SPX 500 Marking Time in Trading Ranges

  2. Forex News

    US Dollar Technical Analysis: Prices Soar to 3-Week High

  3. Forex News

    USD/JPY Technical Analysis: March High in the Crosshairs

  4. Forex News

    USD/CHF Technical Analysis: Franc Declines to Monthly Low

  5. Forex News

    GBP/USD Technical Analysis: Six-Week Uptrend Overturned?

Trading Center