Dollar Strength Continues Doing Damage

PristineTrading

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The U.S. Dollar was strong last week and has been able to clear some price resistance. The wider weekly range suggests sellers that created the prior Topping Tails (TT) were caught and had to pay-up to cover. This week’s Dollar move will either do more damage to connected currencies and OIL or will they reverse.

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The U.S. Dollar shown above with the ETF symbol UUP cleared the prior week’s topping tails decisively and closed near its high. The next resistance area wasn’t far and UUP stopped moving higher right there. If it clears this resistance, it opens the door to a relatively substantial move up to the next resistance. Should that happen, the damage that is being done from the strength in the dollar will continue in certain Forex pairs and Crude oil. On the other hand, any weakness in the Dollar will help those markets to begin a reversal, at least in the short-term.

Let’s look.

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I showed the above chart last week that had moved into its price resistance and informed Topping Tails (TT). As you can see above, there are similar Topping Tails in the Dollar. It also has a similar expanding range weekly bar into its next resistance. The Dollar’s direction will provide a guide for opportunities in this currency pair. Dollar strength will move this pair higher and weakness lower.

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The above currency pair is of the Dollar versus the Yen USD/JPY. The pair has been in a choppy consolidation since its move higher at the end of last year. However, last week’s Dollar strength pushed it higher to the old TT marked where it stopped its advance. Dollar strength next week will move this pair higher and weakness lower and then likely to continue its choppy ways.

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I also showed the EURO last week with its weekly BTs and the base that had formed on the daily time frame. Those pictures of buying that suggested a short-term move higher never triggered what would have been used as an entry. Sometimes that trigger does happen and followed by a failure to move higher. Of course why any entry should be accompanied with a stop-loss based on your trading plan and money management. Last week’s drop and expanding range is the opposite picture of the Dollar. Next support is at the green line below; however, weakness in the Dollar would result in the EUR/USD pair reversing.

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GBP/USD made a feeble attempt at moving up last week, but ultimately failed and moved lower as the Dollar moved higher. As you can see, the next price support level is lower and where buyers would feel more confident buying. Those short will also have a close eye on those levels to cover. This currency pair’s pattern suggests it will move lower, which in turn suggests the Dollar moving higher to its next resistance area. Seems an inflection point is coming soon in many markets.

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Currencies that trade against the Dollar have been weak, but some not as weak as others; AUS/USD is one. It has actually showed good relative strength by holding its prior price support level as the Dollar move up. Notice the weekly Bottoming Tail (BT) and the daily BT that was also an expanded range from the recent days. Pristine Tip: expanding range BTs are a strong signal of a short-term bottom. Price resistance is right overhead, it is going to take some Dollar weakness to overcome it. Dollar strength is likely to cap a move above that resistance.

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Considering AUD’s relative strength, here it is verses JPY. This pair has been at a standoff recently with it moving sideways in a choppy fashion. Last week that ending as the pair cleared that choppy consolidation. AUD may have a hard time against USD if the Dollar shows continued strength, but if the Dollar weakens that should help AUD/JPY continue higher.

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The above chart is of USO the ETF for Crude Oil. Obviously, Crude Oil is not a currency; however, it has a close inverse correlation to the U.S. Dollar. Meaning, as the Dollar moves higher Crude Oil moves lower. There is supply – demand influences on Oil, but since Oil trades in Dollars there is that direct influence. The dollars that are exchanged for Oil is often referred to as “petrodollars” and an important factor to consider for many reasons (not for this time) whenever talk of another currency being used in exchange for Oil. Recently, Russia “talked” about taking Roubles for its Oil, something that would unsettle the markets no doubt and the purpose of that talk. That conversation aside, the Dollar’s direction needs to be watched as a guide to the direction of USO.

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In the chart above, you can see the inverse correlation of USO (Oil ETF) to UUP (Dollar ETF). It’s not exact, but close enough to be aware of if you considering trading USO. This type of inter-market analysis is an excellent guide in markets.
The U.S. Dollar is having a broad influence in many currencies and Crude Oil. It also has an influence on the direction of Gold, but has been less so recently. This Chart of the Week should help you to start understanding how to use the Dollar’s direction to find opportunities in other markets.

That being said, if you are trading the Forex markets, Stock markets – Any markets without a Pristine Stock Market Education and are reading this Chart of the Week – you are doing it with an insight into the type of knowledge shared with our students and what you should have as well.

Join us for this week’s After Market Lessons to learn more about the markets and Pristine. It will be a couple of hours well spent.

All the best,



Greg Capra
President & CEO
Pristine Capital Holdings, Inc.
Pristine.com Trading

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