Look for the Dollar to Consolidate

The dollar rallied across the board on Thursday and this strength should persist today as well. There was only a brief negative reaction to the weak US trade deficit report —wonder why people still react to it. Its rally accelerated after the BoE’s MPC met the market expectations and raised its benchmark interest rate by a quarter-point to a six-year high of 5.5% The dollar should consolidate today, with support from the high inflation data and resistance from the expected weak retail sales.

The euro/dollar sank to a one-month low on Thursday in line with the head-and-shoulders pattern, which targets 1.3380. The close below 1.3530 confirms this formation.

Initial support is at 1.3466. A break below this level would accelerate the decline and the pair would target 1.3420 next. Then, of course, there is the target at 1.3380.

If the neckline at 1.3530 breaks unexpectedly, expect the euro/dollar to bounce to 1.3582. 1.3627 is the top of the right shoulder and further caps are at 1.3653 and 1.3683.

Oscillators are falling.

NEAR-TERM: Mixed to slightly bearish
LONG-TERM: Bullish

Dollar/yen broke out of an inside range but failed to hold on to gains that tested the highs of April 27 and closed slightly lower on Thursday. It should only consolidate today.

Good support remains at 119.65 from another 50-point pivot that targets 119.15 and 120.15.

Resistance is still seen at 120.50 and 120.75. Distant resistance now comes at 121.05 from a 50-point pivot, which targets 120.55 and 121.55.

Oscillators are mixed.

LONG-TERM: Bullish

Sterling/dollar collapsed to a one-month low after the Bank of England’s 25-basis point rate hike. After treading water for a little while, look for another slide.

Immediate support is at 1.9770 from a the Fibonacci retracement level. A close below the 1.9740 level would signal the end of the uptrend. It would then challenge the 1.9655 area.

Initial resistance is now seen at 1.9855. The next levels are 1.9905 and then 1.9995. Above 2.0070, the pound is back on the attack, but this is very unlikely.

Oscillators are falling.

NEAR-TERM: Mixed with bearish bias
LONG-TERM: Bullish

Dollar/Swiss franc
Dollar/Swiss franc broke out of an inside range and surged to a one-month high. Following some further consolidation, it should plow higher still.

Initial resistance comes at 1.2215 from a Fibonacci retracement level. That’s followed by 1.2265 and 1.2285. Distant resistance is at 1.2350.

Support now still comes at 1.2175. The next levels loom at 1.2100 and 1.2060. Distant support lies at 1.1995.

Oscillators are rising.

NEAR-TERM: Mixed with upside bullish
LONG-TERM: Slightly bearish

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