Three Decade Old Trend Line Threatens Dollar's Advance
The bulls planning to push Dollar higher in the wake of higher possibility that U.S. Federal Reserve will hike rates once more this summer and once again by the end of the year, should take a look at the Dollar chart over longer horizon.
This chart, which we acquired from St. Louis FED’s economic dashboard, represents broad based value of Dollar on a trade weighted basis. It can be seen that Dollar, so far, had three significant rallies – popularly known as Reagan Dollar rally of 80s, the biggest, Clinton Dollar rally of 90s and Obama Dollar rally, the latest.
When we draw a simple trend line that connects the highs of Regan and Clinton Dollar rally, it is evident that Obama or the latest Dollar rally, found resistance around the intersection. Anybody, even with a basic knowledge of technical analysis knows that is significant and lines perfectly with the fundamental factor that current pace of FED hike, not enough to support Dollar.
To read about the fundamental check out – http://www.econotimes.com/Why-June-hike-and-twice-this-year-not-enough-to-strengthen-Dollar-213585 We expect, Dollar to rise, only after it finds base and rate hike path steepens. Dollar index is currently trading at 95.26, down -3.4% YTD.