Amid weak stock markets the Dollar was heavy bid last week but now its strength is more and more fading away. The high of the DXY was 97.442 last friday and my target of 97.807 (interims high of 30jun20) was not reached. The big question now is whether the dollar strength will end for now?
With respect to the stock market and high beta currencies in particular the hike train of the FED is expected to start in march and to end in march either. There is not much imagination of a straight forward rate hike cycle because everyone thinks they know that the FED cannot hike several times without putting a big burden on the economy and the stability of the financial markets.
I am not convinced yet of this idea because I do not think that the so called “FED Put” is as high as it was in the last years. You cannot print tons of money without paying a price. And the price will be inflation, even if it's easy at first, to blame the supply side only. Sooner or later Powell has to raise rates to maintain price stability (in a normal world).
Anyway I am not looking for Dollar longs at these levels. The Dollar Index performed very well in the last semester and it makes sense to look for shorts as long as the 97 mark holds.
Last Friday EURUSD printed a bullish reversal candle (very close) with a low at 1.1121 and is running up since. As mentioned before I would rather look for longs above the 1.1200 treshold for an early test of the 1.1331/1.1339 resistance zone.
Good luck,
Sebbo