US Dollar analysis (July 17)

Since the beginning of May, the US Dollar Index is consolidating in a wedge figure and we might see the market going upside and down over the coming days as the overall outlook remains unclear.

US Dollar Index: daily chart

Technically, the Index is well capped by the 76,40 resistance we have been talking about a lot lately. We consider that a daily close above this level would validate a middle/long term reversal. In this event, we might see the buck rallying into the end of the year.
But there is also a risk on the downside if we see a break below the rising trendline around 74,50 and 74,00 by extension (previous low and bollinger band).

We think that the US Dollar is in the process of building a major bottom but as long as we don’t see a break to the upside, there will be a downside risk which seems obvious.

We can’t be more precise at this time considering the latest price actions and how mixed macro-economic developments confuse the outlook. It is worth noting that both United States and Europe have reason for concern in terms of growth pace and debt issues and this is why the consolidation is lasting.
We consider though that a major break will occur before the end of August as it is often the case when the market has been consolidating for quite some time.

We will see how things develop over the coming sessions but we hope we won’t wait too much before a clear directional bias emerges from the market.