The U.S. returns from holiday today, and markets get re-started on a rather quick foot as later this afternoon brings the release of FOMC meeting minutes from the bank’s rate decision in June. This can be a very pertinent driver as there are some details that markets may be looking for, primarily on the front of balance sheet reduction and how that may go along with the Fed’s rate hike plans to the end of 2018.
After that hike in June, the Dollar found support and moved-higher for about two weeks. Then – last week saw an entourage of Central Bankers from some of the largest economies offer comments that created another deluge in USD price action. Much of the bearish move was Euro-related, as the single currency popped-higher after Mario Draghi’s comments were construed in a very hawkish light. Perhaps more interesting is that the day after Draghi’s comments, and ‘unnamed ECB source’ said that those remarks were ‘misjudged’ as they were meant to be more balanced in nature. Markets didn’t care, and the bullish run in the Euro and the bearish drive in the Greenback continued. This is fairly clear evidence of a market attempting to front-run a widely-expected action (ECB stimulus exit).
On Monday, we looked at four resistance levels on DXY in the effort of bearish continuation. As we near the release of those meeting minutes later this afternoon, price action has begun to find resistance at the ‘r1’ level that we looked at to open the week.
Short-Term Resistance in the U.S. Dollar, via ‘DXY’: Four-hour Chart
Chart prepared by James Stanley
If we move down to a shorter-term hourly chart, we can focus-in on this week’s bullish move, and it appears that there could be some deeper continuation into the ‘r2’ zone looked at above. After prices ran into resistance earlier this morning, buyers jumped-in to support around prior resistance of 96.33. If price action breaks-below this level, then bearish continuation can become attractive again. But as long as this level holds, traders will likely want to wait for prices to test the zone around the 96.86 level.
