Has Yellen Dollar Bounce Gone Too Far?

August 30, 2016

The Dollar Index (DXY)

Janet Yellen hawkish statement in Jackson Hole last Friday on 26th August has led to a dramatic move in the dollar. The dollar index reached the biggest intra-day rally of 1.48% since 24th June, the dollar strengthened across the board.

On the daily chart of the dollar index (DXY), the major resistances of 94.73 and 95.00 were both broken by a long bullish candle on Friday. It further broke the next resistance of the 38.2% Fibonacci retracement level at 95.40 and hit a two-week high of 95.80 then held. On the daily chart, the price broke the downtrend line by a long bullish candle on the day of the speech, then held above the support level at 95.40.

The resistance level is at 95.80, followed by 96.00 and 96.23. The newly formed support level is at 95.60, followed by 95.40. The daily KD indicator is above 80, suggesting a retracement.

Gold

The strengthening of the dollar weighed on gold, it turned bearish since 24th August, tested the downside uptrend support line and held. If the dollar continues to be bullish, the support line may be broken.

The KD indicator is below 20, and the CCI indicator is below -100, suggesting a rebound.
The support level is at 1320, followed by 1310 and 1300.
The resistance level is at 1330, followed by 1335.50.

EURUSD

EURUSD broke the downside uptrend channel support after Yellen’s speech. It is currently testing the support level at the 50% Fibonacci retracement level at 1.1157. If it is confirmed broken, the next target level will be 1.1130, followed by 1.1100.

The resistance level is at 1.1200, followed by 1.1240.
The daily time frame KD is below 20, suggesting a rebound.

Keep an eye on the German CPI (YoY and MoM) for August, to be released at 12:00 GMT, and the US Consumer Confidence for August, to be released at 14:00 GMT on 30th August.

We will get a series of important economic figures out of the Eurozone on Wed 31 August. The German Unemployment Rate and German Unemployment Change, to be released at 07:55 GMT. Also Eurozone CPI and Core CPI (YoY) for August, to be released at 09:00 GMT, as it will influence the trend of the DAX index and the strength of the euro.

USDJPY

The consolidation pattern was broken by a long bullish candle after Yellen’s speech. Then it further broke the two major resistances at 101.00 and 102.00.
It is currently testing the resistance level at 102.40. If it is confirmed broken, the next target level will be 102.70.
The newly formed support line is at 102.00, followed by 101.50.

USDCAD

Last Friday, the two major resistances of 1.2900 and 1.3000 were both broken by the strength of the dollar.
On the daily chart, it is currently trading below the resistance at 1.3050, followed by the major resistance of uptrend line at 1.3100. The daily KD indicator is above 80, suggesting a pullback.
The support line is at 1.3000, followed by 1.2970 and 1.2910.

AUDUSD

Last Friday 26th August, AUDUSD turned bearish and broke the major support of the downtrend line.
The newly formed resistance level is at 0.7590, followed by 0.7658.
The support line is at 0.7550, followed by 0.7500.
The daily KD indicator is below 20, suggesting a rebound.

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