US DOLLAR PULLS BACK FROM KEY RESISTANCE AT OCTOBER HIGHS

The US Dollar is pulling back from a key resistance level this morning after what’s become a really strong week. It didn’t start out that way, however, as Tuesday brought upon a test through support at 95.00 that was followed by a very visible showing from bulls that’s only now started to calm. The resistance level that’s helping to cap the morning’s highs was looked at in yesterday’s webinar, and this comes in at 96.04, which is the 50% marker of the 2017-2018 bearish move in DXY. This is also the same price that’s helped to hold resistance in the US Dollar for the past three weeks, as can be seen from the weekly chart below:

US DOLLAR WEEKLY PRICE CHART

Chart prepared by James Stanley

The big question around the Dollar for next week is whether the currency can finally pose a lasting push through this resistance. There was a similar such instance in August, and this is when the Dollar was pushing higher on the back of risk aversion themes as worries were growing around European banks’ exposure to Turkey. But, as markets stepped back from the ledge, so did the US Dollar, and prices fell for much of the remainder of Q3.

But, given the increased focus around the European Commission and the Italian budget, the potential for greater risk aversion is there, and that could compel another topside push through resistance.

Next week’s economic calendar brings an item of interest in that regards, as the Thursday ECB meeting is the high point, and this is when markets will get to hear from ECB President Mr. Mario Draghi on a number of issues. This, of course, is on top of the unpredictable headline-driven volatility that will likely continue to emanate out of Brussels and Rome. Also of interest is a Wednesday rate decision at the Bank of Canada with a strong expectation for a 25 basis point rate hike.