Looking at a dollar retracement
|An effective method to actually deal with a Dollar pullback
The latest market chatter is how much is the latest dollar strength a retracement vs a shift in the trend? It’s a good question and at the very least we need to be prepared for a dollar pullback. The US10 Y yields spiking higher on the US stimulus package from a blue sweep has been the recent catalyst for dollar strength. Sometimes, when there is uncertainty looking at the technical picture can help us to see areas of opportunity that present themselves.
Technical look at the DXY -Three steps to take
Step number 1: Look for a break of the descending trend line. This is the key trend line on the daily chart as it is the high before the most recent low. This break, which has taken place, is significant and it has already happened. In itself it indicates a probable trend change.
Step number 2: a retest of recent lows. This is still to happen. However, if we get a pullback to the recent lows and a rejection of those prices this tells us a trend change/retracement is probable. Look at the chart below for the area to look for this.
Step number 3: If we see a break higher of the recent highs in the DXY that will confirm a pull back. However, due to the narrow reward here (a possible return to 93.00) a favourable entry would be most likely found on a rejection of a recent low re-test. That kind of entry should provide a low risk high reward entry. The technical risk would be the most recent lows. Any return through this level would invalidate this outlook.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.