15 Jun 2015
USD Index: additional consolidation likely – JPM
FXStreet (Barcelona) - FX Strategist at JP Morgan, shares the technical outlook for the USD Index, noting that the lack of any broadbased USD rally suggests further consolidation remains on the cards for the index.
Key Quotes
“While the medium term upside risks are intact, the corrections for the USD indices below the March highs continue to play out. Given the lack of a broadbased USD rally, additional consolidation seems likely. Still, it is important to note that both the DXY and JPM USD Index effectively held important support levels at the May lows. In turn, we sense these levels should maintain the low-end of a potential consolidation phase while maintaining the risk for a return to the underlying uptrend.”
“For the DXY, the 93.25/92.15 zone will continue to act as critical support as it represents the January breakout area, the February reaction low and the 38.2% retracement from the 2014 low. Still, a break back above the 97.75/80 area (May high) is necessary to suggest the upside risks are back on track for a retest, if not break of the 100.39 March high.”
“Similarly, the JPM USD Index effectively held the key 94.00/93.15 zone at the May low and should continue to hold to maintain the upside potential. Note this area represents the January breakout area, the 38.2% retracement from the July ’14 cycle low and the 200-day moving average. Given the strong confluence of support in this area, violations would suggest a more protracted corrective phase is due.”
“Alternately, the ability to extend through the key 97.80/98.20 resistance zone (May/April highs and 76.4% retracement) would suggest an increased risk that the medium term uptrend is back on track.”
Key Quotes
“While the medium term upside risks are intact, the corrections for the USD indices below the March highs continue to play out. Given the lack of a broadbased USD rally, additional consolidation seems likely. Still, it is important to note that both the DXY and JPM USD Index effectively held important support levels at the May lows. In turn, we sense these levels should maintain the low-end of a potential consolidation phase while maintaining the risk for a return to the underlying uptrend.”
“For the DXY, the 93.25/92.15 zone will continue to act as critical support as it represents the January breakout area, the February reaction low and the 38.2% retracement from the 2014 low. Still, a break back above the 97.75/80 area (May high) is necessary to suggest the upside risks are back on track for a retest, if not break of the 100.39 March high.”
“Similarly, the JPM USD Index effectively held the key 94.00/93.15 zone at the May low and should continue to hold to maintain the upside potential. Note this area represents the January breakout area, the 38.2% retracement from the July ’14 cycle low and the 200-day moving average. Given the strong confluence of support in this area, violations would suggest a more protracted corrective phase is due.”
“Alternately, the ability to extend through the key 97.80/98.20 resistance zone (May/April highs and 76.4% retracement) would suggest an increased risk that the medium term uptrend is back on track.”