US Dollar Climbs To #2 Spot On Strong/Weak Analysis Only To Find Month-End Resistance

Key Highlights:

• USD strength has become a theme in September, but long-term doubts remain
• GBP remains strongest in G8 and sees nice lift on comment from EU’s Brexit negotiator
• EUR rebounds off strong multi-year support
• IGCS Highlight: Increase USD/CHF shorts favor failed triple-top pattern

Strong/Weak Analysis is a way to identify momentum in the FX market. Trend traders rely on spotting and riding momentum as it develops and looks to benefit from trends extending, as many do. It’s also worth noting when the strength of a trend is waning, which Strong Weak analysis can also benefit.

Strong/ Weak Index: September 28

Highlights:

-Traders in the market love a good reversal. I do too because that’s where the best trades emerge and the sustainability of a trend in the process is often in doubt without a good understanding of the fundamental underpinnings of the move. This month, DXY has seen a total range of 3.5% to the positive though the price is slipping from monthly highs on Thursday. The price of the index has been decidedly lower for most of 2017 has retraced 38.2% of the 2011-2017 range. The medium trend seems to favor that the rise in the USD will not have a long-life, but for traders looking for confirmation to either side should keep an eye on US Yields. The same force that pushes the USD higher also aligns with the selling of US Treasuries in expectation of inflation, and that produces higher yields. Therefore, if the US 10Y yield creates space above the 200-DMA, we could see further USD strength.

-One reason I like the SW approach to markets is that it favors trend continuation. When a fundamental driver aligns with an extreme ranking, there is often momentum back of the move, which helps to stay with the market. The British Pound, currently the strongest in the index was lifted on Thursday on comments that the Chief Negotiator of from the EU for Brexit noted a “new dynamic” after May’s recent rhetoric. While obstacles admittedly remain, this comment was enough to help lift the British Pound by nearly 0.5% against the USD in the growing hope that the negative effects of the Brexit vote will be mitigated to a higher degree.