Unsurprisingly, last week's article did not go unheeded. It should be said that with a 17.5% increase in the EUR/USD parity since the beginning of the year, expectations for the dollar are all pointing in the same direction. British financiers have an expression that perfectly suits the situation: "crowded trade." The risk is that if everyone is already selling the dollar, who is left to drive it down further? Malicious tongues would say the pigeons, but as this bird is not part of the bestiary of terms traditionally used in finance, I will refrain from using it. "Trend is your friend," replied a colleague, gently mocking my bullish remark. "Until it ends," I retorted, putting forward the technical arguments mentioned last week in these columns. That being said, has the weekly hammer been validated? Yes! Are all dollar crosses now bullish? No, not yet, but we need to take a look at which pairs are most likely to benefit from this bullish reversal (hopefully, of course).
The USD/JPY continues to fluctuate within a narrow range between 148.65/149.20 and 146.00. If resistance is broken, however, the potential should be limited to 150.88/151.65, the pivot point that needs to be exceeded to open up 154.30. The USD/CHF has also formed a reversal pattern (hammer) in weekly data with a target of 0.7860/25. A break above 0.8000 will confirm a rebound towards 0.8150 or even 0.8350.
Amongst commodity currencies, the USD/CAD rebounded from the bottom of its range at 1.3720 before breaking through its resistance at 1.3925, normally opening the way to 1.404 max 1.4155. The Aussie rallied and hit its target at 0.6700/25, breaking through 0.6570. The first support level is around 0.6520, followed by 0.6425/00. Conversely, the Kiwi hit 0.6000 before breaking through its horizontal support at 0.5800. It has downside potential towards 0.5690.
