On Monday, we looked at the continued top-side breakout in the US Dollar; and after the Greenback set a fresh 8-month high yesterday, a disappointing Consumer Confidence print out of the U.S. has helped to drive the Dollar to the ‘S1’ zone of support that we’ve been looking at.
But taken in context, the month of October has seen a big move-higher in the U.S. Dollar, with only brief periods in which strength wasn’t present. The move, of course, has been driven by more-hawkish Federal Reserve commentary that has helped to stoke expectations for an interest rate hike out of the bank before the end of the year. Given that the Fed has only two meetings remaining in 2016, and also given that one of those meetings is just a week away, and one week ahead of U.S. Presidential elections, and deductively there’s pretty much only one meeting in which markets might expect a hike out of the Fed. As of now, markets are currently pricing in an approximate 71.4% chance of a rate hike out of the Fed in December. As these expectations have grown stronger throughout the month, so has the bullish move in the U.S. Dollar.
Chart prepared by James Stanley
To put into scope how motivated markets have been to drive this Dollar-move higher, last night saw the first support break of a ‘higher-low’ on the 4-hour chart of the U.S. Dollar. So, each time that the Greenback has moved lower towards support during the month of October, traders have rushed in to buy. That is, of course, until this morning. And this can speak to the nature of the trend, how much motivation is behind the move and how much continuation potential that ‘theme’ may offer.
Chart prepared by James Stanley
With the U.S. Dollar Now Facing Pressure, Where Can We Look for Support to Develop?
Given recent price action, traders can look to an assortment of support levels in the effort of timing an entry into the next wave of USD-continuation. While price action has attempted to develop support at the same ‘S1’ zone that we’ve been watching since Monday, sellers have been showing up to fade the move. So, it doesn’t appear that continuation potential is showing just yet. However, a bit deeper into support are three additional levels (S2-S4 on the below chart) that traders can look to in the effort of catching top-side USD-continuation.
