Chart of the Day: A bullish breakout on the cards for the USD?
Despite the consensus expecting a weaker USD in 2020, if we use the USD index (USDX) as our proxy on the broad USD, then we can see that once again we are approaching 97.30/45 – an area the market has been happy to fade rallies, really since the beginning of December.
From the turn of the year the index has been grinding higher, and while we did see a lower low on 15 and 16 January, the trend remains intact and offers some scope that the USD bulls will have enough in the tank to take the USD through this supply zone. A weekly close above 97.40 would be a bullish signal and likely marry with EURUSD testing 1.0970. A stronger USD also carries implications for gold, emerging markets and fixed income markets.
So, the question we ask is whether this time we see a bullish break and a possible new bullish trend develop in the USD. Or, do we lean on a reliable supply zone and fade this rally? The chart should be on the high watch list as the set-up holds strong trading implications.
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