Dollar Pulled Back From Resistance, No Man’s Land

by on January 16, 2014 8:21 pm GMT

The dollar is down on the day with data from this morning showing that inflation modestly picked up in December. Some see the pullback as a retracement from the upward movement made after bottoming out December 18 on the FOMC minutes report; however, the larger picture is that the dollar have been relatively range bound when all of the volatility wicks have been taking into account. The dollar have fluctuated between 81.30 and 80.10 in sort of a “no man’s land.” (In reference to the ground separating trenches during the World Wars).

Shahab Jalinoos, a FX strategist for UBS, sad “The dollar’s fall [may] reflect bigger-than-expected continuing claims and some could see that as an argument for the labor market being not too strong.” The dollar is off from its lows today, currently down .13 percent to 81.04.

The daily chart shows the choppy range of the dollar since November. A Fibonacci retracement, corresponding with the dollar’s overall downtrend from the high, price action has been repeatedly rejected at the 61.8 percent level. This strengthens the case that 81.226 remains solid resistance moving forward because only one session has been able to close above this mark since November 8.

The dollar will find support near 80.90 and 80.55, as well as the Fib. 78.6 percent level. However, the dollar has done very little to convince that a significant move higher is in the works. The general assumption was that the dollar will trend with the economy, but as recent data has suggested, analysts may be getting ahead of themselves.

If the dollar can close above 81.226 with some momentum, price action could take it to the gap resistance created on September 14, potentially touching 81.94. However, price action has not showed the recent momentum needed to do so.

1D Chart of DX

1D Chart of DX