USD Comeback: The U.S. Dollar has started this week off on a rather bullish foot, and this comes after the currency posed a hard reversal on Wednesday of last week. As we opened last week with Fed Chair Janet Yellen’s twice-annual Humphrey-Hawkins testimony on the calendar, the potential for a return of the bullish U.S. Dollar up-trend was very much alive. After a near-historic run after the Presidential Election in November, the Greenback spent most of January heading-lower as traders realized gains and tightened-up positions. But as we came-in to February, support began to show and bulls began to return; and as we opened last week with Fed Chair Janet Yellen’s two-day Humphrey-Hawkins testimony on the calendar, the opportunity for that trend to extend was very much there.
Day one of that testimony on Tuesday further contributed to the Dollar’s gains; but it was the strong inflation print on Wednesday morning that really excited matters, as the Dollar ran-up to a key resistance level at 101.53. This is the 50% retracement of the January retracement; and should price action be able to show a sustained break-above this level, the prospect of the bullish up-trend returning would be quite a bit more attractive.
But that inflation-fueled run-higher on Wednesday morning was short-lived: Just as Chair Yellen began speaking on day two of her Humphrey-Hawkins testimony, the Dollar began to sell-off, and continued to do so into Thursday. Support finally showed at mid-day on Thursday, and since then bulls have returned to drive prices back up to the level where we reversed on Wednesday: This is the 50% retracement of the bearish January move, and should price action be able to pose a sustained break-above this level, continuation prospects could seem considerably more-likely.
Chart prepared by James Stanley
USD/JPY remains subdued
While the U.S. Dollar is testing resistance from last week with legitimate top-side continuation prospects, price action in USD/JPY is quite a bit more subdued at the moment. Last week’s high on Wednesday in USD/JPY was unable to break-above the prior swing-high at the end of January (DXY was well-above that point using similar observations). And on this most recent run, the Dollar has already ran-back to resistance while USD/JPY is still well-below those prior highs.
