Dollar Leans Towards Important Bearish Breaks, Will Liquidity Save It?

Talking Points:

  • DXY Dollar Index marked a 16-month high this past Monday, but reversal patters are starting to form
  • Liquidity – deflated by the US holiday – will play a key role in determining its ability to forge breaks
  • See how retail FX traders are positioning in Dollar-based majors like EURUSD on the sentiment page

Technical Forecast for US Dollar: Neutral

A technical break does not guarantee trend intent. That is something that I like to repeat to myself in order to anchor my expectations in more grounded analysis rather than simply chase the promise of volatility. The Dollar embodied that lesson this past week when the DXY Index and EURUSD charged Monday to the highest level (lowest for EURUSD) since June 2017. The world’s most liquid currency and the most frequently referenced measure for the individual currency signaled a key high, why wouldn’t speculative interests pick up on the move? In reality, if we look to this currency’s habits around previous high-profile technical breaks, we find a pattern of the market’s immediately losing traction after clearing key levels. Good examples are the August charge above 95.65 which at the

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