What will the Fed do to the Dollar?
Hours ahead of the Fed, the Dollar-Index chart does not have good news for the bulls.
A look at what has happened since late September says it all.
After the hard drop from the COVID top seen in March 2020 near 103 points, the greenback used Georgia Senate elections in the first days of 2021 to build a bottom, a little above 89 points. From there, a rising move started. Is it corrective or is it impulsive? Let’s try to answer that question.
First evidence is that the most recent recovery attempt has topped extremely close to the Fibonacci 38.2% retracement level for the whole drop from the 2020 yearly lo. This level is at 94.47 & is also very close to the monthly lo of March 2020, the monthly highs of September & October 2020 & then again September & October. The Fibonacci calculations & 5 monthly tops & bottoms assure the chartist that this level is indeed key.
As long as the index is below this level, the outlook will be negative, and the only way out of some hard times coming after the Fed is for the DXY to break above 94.47. The negative outlook will intensify in case the bears can pull the price lower below what looks like a key support at 93.45. In this case, the Dollar will be expected to go through a phase of weakness that could target the key levels around 92 & 91 (to be more specific: 92.05 & 90.97).
On the other hand, if the surprise happens, and the bulls drive this market up the hill & above 94.47, then the weakness expectations will lose the chart support, and a period of Dollar strength should be expected. The move that could follow a break above 94.47, could be fierce, leading to the next couple of long-term retracement levels, at 96.10 & 97.73.
We are only about 25 basis points below our key resistance at 94.47, and only 200 minutes or so away from knowing what the Fed has decided, so let us wait & see!
Munther Marji CMT
A look at what has happened since late September says it all.
After the hard drop from the COVID top seen in March 2020 near 103 points, the greenback used Georgia Senate elections in the first days of 2021 to build a bottom, a little above 89 points. From there, a rising move started. Is it corrective or is it impulsive? Let’s try to answer that question.
First evidence is that the most recent recovery attempt has topped extremely close to the Fibonacci 38.2% retracement level for the whole drop from the 2020 yearly lo. This level is at 94.47 & is also very close to the monthly lo of March 2020, the monthly highs of September & October 2020 & then again September & October. The Fibonacci calculations & 5 monthly tops & bottoms assure the chartist that this level is indeed key.
As long as the index is below this level, the outlook will be negative, and the only way out of some hard times coming after the Fed is for the DXY to break above 94.47. The negative outlook will intensify in case the bears can pull the price lower below what looks like a key support at 93.45. In this case, the Dollar will be expected to go through a phase of weakness that could target the key levels around 92 & 91 (to be more specific: 92.05 & 90.97).
On the other hand, if the surprise happens, and the bulls drive this market up the hill & above 94.47, then the weakness expectations will lose the chart support, and a period of Dollar strength should be expected. The move that could follow a break above 94.47, could be fierce, leading to the next couple of long-term retracement levels, at 96.10 & 97.73.
We are only about 25 basis points below our key resistance at 94.47, and only 200 minutes or so away from knowing what the Fed has decided, so let us wait & see!
Munther Marji CMT
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