Dollar Index study - DXY pullback and possible directionDollar Index study - DXY pullback and possible direction
Dollar_index
DOLLAR (W)The U.S. dollar after a consistent decline since the FOMC Policy is now witnessing some mild bullishness to post a rebound following a long stretch of declines. The Fed meeting minutes released lately shows that officials factored in the tax cuts. While tax cuts were one of the factors that led the central bank to hike interest rates in December. Inflation, however, is expected to remain below the Fed's target for longer.
Higher timeframe charts are clearly highlighting that the Dollar Index has been fighting a tough battle in holding off the supports. At the moment the support level is being cautiously held as overall sentiment remains muted on the Dollar. price break and close below 91 develops. We continue to maintain that situation could improve only when the DX starts moving above 93.50 till then it’s a tough call for the basket. The negative DI is seen inching higher while the prices are seen stalling. DX is seen under pressure and is now coiling once again towards a trended scenario once again and this could now translate into some rangebound action for the next few days.
GOLD (W)Gold steadied last week after witnessing a steady decline is seen rebounding as the dollar seems to be tripping on reduced expectations for U.S. interest rate hikes next year. The dollar suffered its biggest drop in five months on Wednesday after minutes from the U.S. Federal Reserve's showed "many participants" were concerned inflation would stay below the bank's 2 percent target for longer than expected. The greenback was still nursing losses on Thursday,supporting dollar-priced gold by making it cheaper for non-U.S.
On the charts too we note that the rise seen on the charts into the recent pullback into the lower channel. The previous pullback into the value region around 29440 we can note that the trends have been quite positive in reviving from those levels. Hence we conclude that we should be revisit our bullish bias and look towards initiating a long at current levels in the next few days. The resistance levels are at much higher levels and hence it would be a good spot to initiate a long. The positive momentum readings are in sync with the lower Pitchfork channel supports seen in the prices towards definitely suggesting that trend is poised to head higher. With prices holding the lower end of the channel one should look for a long opportunity at current levels for a rise towards 30000 on MCX Gold Charts for Indian Traders or $1300 for the international players.
Dollar Index Weekly Supports proved to be quite determined in producing a strong recovery. However the rally now has tread into median line resistance and this could now hold back further strengthening next week and push the DX into a range until 94.30 is surpassed.
Dollar Index WDollar Index has been witnessing a freefall and the fall beyond critical supports around 94.30 mentioned in the last issue lead the DX lower. Currently, the U.S. currency's performance against the euro and five other currencies, hit its lowest level since May 3, 2016. The sharp weakness not witnessed since the period of January to July 1986 is driven by disappointing economic data, political uncertainty and positive developments abroad have sent the U.S. dollar lower despite two rate hikes by the Federal Reserve. The recent selling seems to be overdone and hence a stronger U.S. dollar rebound from current levels are expected by year-end 2017.
Dollar Nifty Co-relationIn view that the dollar has reached a phase where some consolidation / correction is imminent.
We can look at either going long in the dollar to hedge our Nifty / Bank Nifty longs.
Or we can also pick dollar puts for next week as a stand alone trade in just the dollar.
