Another short squeeze for the US Dollar bulls
Skerdian Meta • 2 min read
The Dollar is really feeling the squeeze
The US Dollar has enjoyed some positive momentum in the last 5-6 weeks. It reached 1.0560 against the Euro and 1.50 against the British Pound. But, every trend has it´s setbacks, the price doesn´t go up in a straight line. There are always retraces and pullbacks now and again, before the next wave of buying. That´s what has happened yesterday in the US session and this morning. We have seen a move that started as a small retrace and turned into a squeeze. We have seen a similar occurrence about two weeks ago when the USD lost about 150 pips against most of the majors during a few trading sessions, and this squeeze is smaller than that, unless it keeps going for another 60-70 pips. This depicts why these squeezes are hard to trade. Do you sell because you think it might be over… or do you buy because the retrace will go on?
We opened two sell forex signals on AUD/USD and GBP/USD yesterday, because we thought the retrace was over, but it wasn´t so. The commodity dollars, in particular, have taken full advantage of this USD short squeeze. The New Zealand and the Australian Dollars are up around 150 pips since yesterday morning and the fundamentals have played a big part in this jump. The commodity prices declined 22% y/y but the building approvals went up by 3.9% this month against -2.4% expected. This means that the Australian economy is becoming less dependent on raw materials and commodities and the service sector is becoming more important. On top of that, the RBA statement painted a better picture of the Australian economy than in the previous month. We have opened a sell forex signal on EUR/USD since last night, because we thought the retrace was over – but this remains to be seen.