Late on in 2018, the Dollar Index came up against the crucial hurdle at 97.90/98.10 representing the highs of June 2017, and the 61.8% retracement of the correction since 2017 peak.
Multiple attempts at overwhelming this resistance have turned out to be futile, say analysts at Société Générale.
In a note to clients, Stephanie Aymes, Tanmay Purohit and Natarajan Visweswaran, analysts at the French investment bank, said the index appears to be evolving within a possible Double Top which denotes the up move has been running out of steam lately and symptoms of a correction to come. Thus, 97.90/98.10 will remain a critical resistance level.
“Since 3Q18 the index has been in a wait-and-see mode with price action framed by a moderately ascending channel. It recently revisited the lower band of that channel and the 200-DMA (now at 95.97/95.60) giving way to a laborious and choppy rebound bringing it once again towards above-mentioned hurdle of 97.90/98.10.
“The upside appears to remain contained however symptoms of a large decline are still awaited. 96.62/96.42 is an immediate support while the channel near 95.97/95.60 will decide if an elongated correction takes shape,” they added.
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Rebound in EUR/USD recently petered out, they added, after flirting with the median of the channel since last year and the 200-DMA (1.1450/1.1517). Undergoing a slow correction consisting of overlapping waves, EUR/USD has once again reached the support zone at 1.1187/20 representing the 61.8% retracement from 2017 low.
“This remains a crucial level. Only a definite break below will mean possibility of the next leg of down move. Short-term, an initial recovery is being witnessed and EUR/USD could form a potential weekly Doji which denotes opening price and closing price have remained unchanged through the week. This shows indecision among market participants however a change in trend is still awaited.”
1.1285/1.1316 are initial resistance levels while recent peak at 1.1450/1.1517, also the 200-DMA is a decisive resistance which must be reclaimed for symptoms of a large rebound, the SocGen analysts concluded.
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