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Unlocking the dollar’s longer-term potential

As the market speculates over the timing of a U.S. Federal Reserve taper, longer-term charts might unlock the dollar’s potential, with or without the Fed’s help.

The weekly chart shows the dollar index climbing within a thick and rising Ichimoku cloud with 96.098 and 91.340 parameters. Progress through the cloud has weakened a bearish moving average cross. July’s crossing of the 100-week moving average below the 200-week line was a strong bear signal.

Cancelling out this signal and meeting a minimum Fibonacci retracement – 23.6% of the 102.99-to-89.20 March 2020 to January 2021 drop, at 92.45 – could open up a larger gain. The 38.2% and key 50% retrace levels are at 94.47 and 96.09.

The high from September 2020 also provides a bull target at 94.74, with the 200-week moving average beyond at 94.79.

The monthly chart shows August cancelling out July’s fall, but a pullback from a 93.374 high is leaving a long upper candle shadow, which hints at a pick-up in supply.

Overall, the dollar has potential, at least technically, to go higher.
Source: Reuters (Reporting by Peter Stoneham)

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