FXStreet (Bali) - Niall O'Connor, FX Strategist at JPMorgan, notes that the USD short term backdrop has improved in recent weeks, although recognizing that key hurdles lie ahead.

Key Quotes

"The setup for the broad USD picture has improved over the past few weeks in line with the reversal from the July lows. While last week’s breakdown in EUR/USD to new year-to- date lows has garnered most of the attention, the price action for both the DXY and the JPM USD Index suggests the backdrop for the USD has improved on a broader scale."

"Note that both held critical support levels at their recent lows leading to the current strength. In this regard, the DXY held the key 79.70 support zone and 61.8% retracement of the May-June advance. As important, the JPM USD Index reversed from the critical 83.60/83.40 support zone which included the November low and the 76.4% retracement of the rally from the October ’13 low."

"Moreover, the price action has shifted with an impulsive tone suggesting the advance is developing with a trending bias. This improved tone suggests a growing risk of additional upside in the weeks ahead. The next key hurdles will be a critical test and should help define whether a more sustained advance can develop."

"The 80.90/81.02 June highs are the critical test for the DXY. In line with the impulsive reversal from the May low, upside breaks through these levels would imply another up-leg to this developing uptrend is underway. This break should allow for a closer test, if not break of the 81.39/81.48 January- November range highs. Importantly, the July lows should continue to hold to maintain this developing bullish framework."

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
COMPANIES IN THIS ARTICLE
Trading Center