TechnoMeter

Technical Forecast for US Dollar: Bearish



We have started the new trading year in earnest, but the Dollar continues to hold to the range it maintained through the final two months of 2018. That is unlikely to be the case for much longer however. The rest rate of volatility has increased across the entire financial system. We have seen volatility in US equities in particular surge both in price-based measures (like the ATR) as well as implied figures (derived from options). It is possible for a single asset or currency to diverge from the norm for a while; but that is not a condition that can persist indefinitely.

While it may not have to happen in the week ahead, the Greenback is very likely to break from its range between 97.70 and 95.80 soon. We can see the levels of activity are starting to seriously threaten the quiet normalcy when we consider the DXY Dollar Index's technical range and its underlying activity. Below, we have the 20-day average true range (a good measure of activity) in red and the 50-day range as a percentage of the underlying currency's price. This looks like a highly pressurized breakout risk.

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