An interesting start to the week for the US dollar, as the currency paused for breath on the daily dollar index chart, following it’s recent bullish run higher, with Monday’s price action, triggering an isolated pivot high in the upwards trend. Whilst we can expect to see the index push lower as a result, for a longer term outlook on the index, we need to consider recent associated price action in multiple time frames. The question now is whether we are entering a period of sideways price congestion before a further move higher, or indeed a reversal in trend ?
Starting with the isolated pivots, Friday’s pivot high, was higher than that on Tuesday in the week before, suggesting sentiment for the US dollar remains positive, and whilst the trend dots have flattened on the daily chart, they remain bullish. The trend on the three day chart remains firmly in congestion in white, and until this transitions to green, then the longer term bullish sentiment cannot be confirmed. However, should this ultimately change to green, then this will add further momentum to the move higher. The volume on both time frames is also confirming this view. The volumes on the daily chart are both bullish and rising, and despite Monday’s minor bout of selling, buyers remain firmly in control. The same is true on the three day chart, where the buyers have been in charge of the market since early October, and throughout November. Finally the Heatmap has remained bullish since late October, following the breakout from sideways price congestion.
The key price level on the daily chart is now in the 81.50 price level, where the market failed on Monday as it ran into price congestion above, which then brought a temporary halt to the move higher. For this to continue, we now need to see a break and hold above this price point, and on to test the next level in the 82.56 region and beyond. This will then provide a solid platform of support and extend gains for the US dollar further in due course.
By Anna Coulling