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Today’s Trading Edge: Dollar Index still reeling from dovish Fed’s Minutes

Posted by WorldWideMarkets . on Aug 18, 2016 7:55:05 PM


The U.S. dollar fell for a fifth consecutive day and approaches near pre-Brexit levels.  The recent dollar weakness extended after the Fed’s Minutes highlighted that members were split on a rate hike and wanted more data before deciding on a hiking rates.  Several officials saw wage increases as evidence of a tightening labor market. 

Today, the dollar had little reaction in summer trade to both better than expected Unemployment claims and Philly Fed Manufacturing Index.  The financial markets are also shrugging off Fed’s Dudley comments that fears of labor market stalling are much reduced and two months of strong jobs reports allayed concerns about a slowdown. 

The US dollar index daily chart shows that the strong selloff that started on July 25th has now taken price below all three key SMA(s).  The most recent wave of selling accelerated once price broke below the 100-day SMA, which currently trades around the 95.09 level.  If the current slide continues, price may find support around the 93.83 level.  It is around that area that price could form a bullish ABCD pattern.  Point D is targeted with the 161.8 Fibonacci expansion level of the B to C leg.  If valid we could see a rebound towards the 95.00 zone.  If the pattern is invalidated, further support could come from the 91.80 to 92.50 region.   

The trade: Buy Dollar Index at 93.85 with a stop loss at 93.35 and take profit at 95.35.  The risk/reward ratio is 1:3

Topics: Fed, Interest Rate, USD, dollar index


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