US Dollar Remains a Buy Despite Risk of Pullback

By DailyFx | August 27, 2014 AAA

DailyFX.com -

- US Dollar breaks significant resistance versus Euro, Yen

- We see risk of a short-term EURUSD low next week

- Shifts in trends nonetheless leave us in favor of USD strength

The US Dollar near multi-year highs against major counterparts. There’s always risk of pullback, but we see further room for the Greenback to rally.

In recent weeks we’ve warned that the US Dollar could soon reverse as it showed clearly difficulty trading above important resistance versus the Euro and Japanese Yen. Yet the Greenback has since broken to major highs versus both the EUR and JPY, and indeed the Dow Jones FXCM Dollar Index is now at its 7th-consecutive weekly advance.

Dow Jones FXCM Dollar Index Breaks Key Resistance at 7th-Consecutive Weekly Advance

US Dollar Remains a Buy Despite Risk of Pullback

Source: FXCM Trading Station Desktop, Prepared by David Rodriguez.

The risk of a short-term pullback is clear, but the trend has turned and we mostly want to position ourselves for USD strength.

FX volatility prices show that traders are increasingly betting on/hedging against sharper currency swings. This in itself hardly guarantees that the Dollar will continue higher, but it does support the case for an important shift in broader market conditions.

Forex Volatility Prices Hit Higher Highs, Support Shift in Market Conditions

US Dollar Remains a Buy Despite Risk of Pullback

Data source: Bloomberg, DailyFX Calculations

See the table below for full strategy rundown on a per-currency pair basis and keep track of changing conditions with future e-mail updates via my distribution list.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

US Dollar Remains a Buy Despite Risk of Pullback

US Dollar Remains a Buy Despite Risk of Pullback

Automate our SSI-based trading strategies via Mirror Trader free of charge

comments powered by Disqus
Related Forex Analysis
  1. USD/JPY eyes next week data as key - Scotiabank
    Forex News

    USD/JPY eyes next week data as key - Scotiabank

  2. Still solid GDP growth - BNP
    Forex News

    Still solid GDP growth - BNP

  3. EUR/USD aiming for 1.2700
    Forex News

    EUR/USD aiming for 1.2700

  4. GBP/USD extends gains, nears 1.6100
    Forex News

    GBP/USD extends gains, nears 1.6100

  5. USD/JPY consolidating is latest gains around 108.00 - FXStreet
    Forex News

    USD/JPY consolidating is latest gains around 108.00 - FXStreet

Trading Center