DXY Getting Hammered At The Highs

Around current levels, DXY is on track to close the week with a bearish reversal at the highs.

Its failure to hold above 96.98 resistance has the hallmarks of a bull-trap. Yet what makes it more intriguing is that it almost mirrors the hammer seen in August which marked a 3.6% decline spanning 6 weeks. Throw in the bearish RSI divergence and we have a case for a correction from current levels. Keep in mind that the weekly trend remains bullish above 93.81, but the odds appear to favour a pause in trend at the very least.

Switching to the daily chart clearly shows the magnitude of yesterday’s sell-off. Suffering its third most bearish session this year and largest sell-off during this year’s rally, bearish range expansion has clearly kicked in.

It’s also interesting to note that, over the past year, DXY has shown a tendency to close lower the following week after a large down day. With yesterday’s -0.88% decline being in the top-20 of bad days, we looked at how it performed against the other 19 occasions. Whilst DXY closed higher 55.6% of the time the following day, it closed lower 63.2% of occasions one week later. If it’s to follow that tendency, we could be in for a bounce before further losses, and price action on the daily could back this up.

As we head towards today’s NFP report, price action is within proximity to the 96.07/16 support zone which comprises of structural highs and the 20-day MA. It’s likely to tempt profit taking ahead of the weekend so, unless NFP is a disaster, it could close above this key zone. Yet if bears are to drive it lower next week, there’s not much in the way of support until 94.79. This could have huge implications for FX markets, although it’s worth pointing out that AUD/USD, NZD/USD and GBP/USD have all made solid progress from arguably oversold conditions.

 

Faraday Research offers real time FX and Equity trade signals from qualified analysts. Click here to try us free.

 

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

Follow @FaradayResearch

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

WHAT IS ADVFN?

ADVFN covers all things stock market.

From the news and opinion pieces on pages like this to share discussion forums, charting tools, financials, live share prices and Level 2, order book data

If you trade or invest ADVFN has the tools you need to make the right decisions.

• 

  101 Ways to Pick Stock Market Winners

  You need the number one bestselling investment guide, the definitive text for day traders, investors and stock pickers.

• 

  The Death of Wealth

  Dissecting the global economy and the financial markets, the book lays out the evidence for the next economic game changer: the Death of Wealth.

• 

  Currencies Direct

• 

  Quoted Data

• 

  Peter Gold

• 

  Alexander Evagora