- USDOLLAR Index at highest level since 2/7/2014.
- USDCHF opens week in 0.9160/89 target zone.
- US Dollar strength in August shouldn't surprise - it's a seasonally strong month.
The Jackson Hole Economic Policy Symposium has yielded bullish results for the US Dollar, which isn't necessarily a surprise given the recent strength of the US economy. The Citi Economic Surprise Index has risen to +4.4, its highest level since February 14, which matches the USDOLLAR Index's rise to its highest level since February 7.
The wishy-washy nature of Fed Chair Yellen's comments on Friday were of course of the academic/theoretical sense; there were no Wall Street participants at the conference. Yet even vagaries like saying 'interest rates could rise sooner than market participants expect if the labor market progresses faster' have proven enough to spark some life into Fed rate speculation.
At the present juncture, even as the US Dollar extends its bull run, it's difficult to get on board with fresh longs given the overbought nature of the current rally. Our preference is to buy dips in the greenback.
One such opportunity may arise in USDCHF, which has opened the week at its highest levels since January amid the EURUSD's slump below $1.3200. USDCHF has achieved the Sf0.9160/89 target zone from the double bottom and AB=CD patterns, suggesting that some near-term relief may be due. This could coincide with a small rally in EURUSD, which we would look to sell.
See the video above for technical considerations in EURUSD, USDCHF, and the USDOLLAR Index, as well as a more detailed look into what ECB President Mario Draghi said over the weekend that has provoked fresh monthly and yearly lows in EURUSD to start the last week of August.
Read more: Fed’s Yellen Stokes USD Rally as Labor Progress Could Incite Rate Hikes