Originally published by Guppytraders.com
The breakout in the US dollar appears to have slowed. Investors across the board are eager to determine if this is the end of dollar strength, or just a pause. Before we get too carried away with the idea of a strong dollar its useful to look at the chart. The dollar at $0.95 is not a strong dollar when compared to the December 2016 peaks around $1.03. At $0.95 is stronger than it was in March when it hammered out a low near $0.88.
Currently the dollar has reacted away from the relatively weak resistance level near $0.97. This level is a technical resistance level calculated by projecting the trading band behavior. Using the same trade band projection methods, a breakout above $0.97 has a target near $0.99. This is a stronger resistance target that is confirmed by previous price activity near this level.
The $0.97 level is a weak resistance level so the pullback is not a reaction away from strong resistance. This suggests the pullback is more consistent with the normal rally and retreat behavior seen in any trend.
The key evidence that answers the question is found in the relationships within the elements of the Guppy Multiple Moving Average (GMMA) indicator.
Trend analysis is applied using the Guppy Multiple Moving Average indicator. The GMMA analysis shows the uptrend is gathering strength.
There are three GMMA trend analysis features. The first feature is that the long term GMMA has compressed and turned upwards. This is bullish.
The second feature is the way the price has clustered along the upper edge of the short term GMMA as the rally developed.. This further confirms uptrend strength.
The third feature is the way the short term GMA has moved above the long term GMMA and also expanded. This shows traders are confident in the trend change. They enter the market as long side buyers when weakness develops. This buying uses the lower edge of the short term GMMA as a support rebound feature.
These features – strong GMMA trend behaviour and weak resistance – suggest it is easy for the dollar to develop more upside.
The upside targets are well defined using trading band analysis. Traders watch for consolidation and a rebound from $0.95 followed by a test of the upper edge of the trading band near $0.97. A breakout above this level has a trade band target near $0.99.
We use the ANTSYSS trade method to extract good returns from the potentially fast rally as the rebound develops.
Daryl Guppy is a leading international financial technical analysis expert and special consultant to Axicorp. Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.