USD Rallies-Double Bottom At The Davos Low

Posted Tuesday, February 20, 2018 by
Shain Vernier • 1 min read

The USD is marching north today, led by gains against the Euro, Swiss franc, and Japanese yen. Shortly, several U.S. Treasuries auctions are scheduled to take place. While not typically market movers, the current relationship between U.S. Treasuries and equities will have traders watching the 2-year note yields with interest.

Over the past six weeks, I have referenced the weakness exhibited by the USD during the World Economic Forum (WEF) at Davos. The “Davos Low” represents the USD index value at its weakest point during the WEF. Last Friday it withstood a formidable test.

USD Index Technicals

A brief look at the daily chart for March USD Index futures illustrates the importance of the trading range established during the WEF at Davos.

March USD Index Futures (DX), Daily Chart

Last Friday’s action was significant, defined by a failed auction under the Davos Low. After a fresh yearly bottom was established (88.150), March USD Index futures rebounded promptly. The result is a clear double-bottom formation in the range of 88.255 – 88.150

Overview: As of this writing, price is firmly established in the center of the Davos range. From a technical perspective, the bias for the intermediate term is bullish. With the formation of the double-bottom and the recent Bollinger MP/Daily SMA crossover, a rally from current levels is probable.

The U.S. dollar is noncommittal and in heavy rotation between 90.155 and 88.255. With rate hikes and tightening on the horizon from the U.S. Federal Reserve, we may be witnessing the greenback’s low point for 2018.

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