The weakness seen in the Dollar for majority of 2011 continued early last week with further declines seeing the greenback slide as low as 75.25 an area last seen in December 09. However, the second half of the week saw strength kicking back in pushing the DXY almost 100points higher than its earlier lows.
The 76.25 area (lows from early March) now sits as upper resistance. Any struggle to break this area could bring further bearish momentum for the Dollar. Further up from here we have the 77.30 area which sits as our next level of resistance which we identified last week as a possible area the market could ‘pull back’ to before continuing it’s downwards spiral. We will be monitoring both these areas as possible roadblocks pushing the market back down.
Last week our analysis showed an H, L, LH, LL, LH, LL pattern on the weekly timeframe. This pattern can also be seen on the daily’s backing up and giving strength to our weekly TF analysis. We’re potentially at the area for the next lower high and should we see a push below 75.25 our pattern would continue with its bearish bias.
The weekly TF this week has kicked up a potential double bottom suggesting we could see a ‘bounce’ from here with the dollar picking up strength and moving back higher. Although last week we did break through resistance from November lows we only ‘spiked’ though with the body of the weekly candle closing significantly higher than our Nov 2010 lows.
Its important to remember that we wont be ‘jumping’ into any trades at the levels/areas we’ve identified and will be waiting for price action set ups before making any trading decisions.
