Dollar bulls resume as March rate hike likely

Markets picked up and the Dollar bulls continue long entries after Trump’s Congressional speech.

Although his proposals continued to lack detailed specifics, his tone was said to be less confrontational. Trump pledged to deliver massive tax relief to the middle class and corporate tax cuts as well as spend heavily on infrastructure and ease regulations.

Additionally, traders anticipate a March rate hike as the Federal Reserve continues to caution inflation and economic growth conditions. Most recent Manufacturing PMI jumped to 57.7 up from last month’s 56.0 posting.

Over on the technical setups front, I continue to remain bearish on the Australian Dollar and Great Britain Pound. The drop in the Pound signals uncertainty with the Brexit plan over the next two years while economic data paced slower than anticipated.

screenshot-at-mar-02-01-10-12
GBPUSD 1-Day

Over on the daily timeframe, we begin to see the accelerated sell-off especially the second last bar representing the day of Trump’s speech before Congress. From a technical standpoint, this move is far from over as we begin to observe the acceleration of the shorter moving average deviating away from the longer. This signals bearish momentum is expected to pick up even further in the days and weeks to come especially after a tight range in February.

screenshot-at-mar-02-01-14-51
AUDUSD 1-Day

Similarly, on AUDUSD, buying pressure remains weak as represented by overlapping bars especially bears quickly countering any bullish strength this pair may have exhibited. Especially in anticipation to the next rate hike and optimism for corporate profitability, traders would consider unloading commodity holdings for higher return alternatives.

screenshot-at-mar-02-01-18-44
AUDUSD 4-Hour

Technical indication wise, we see a moving average cross-over once again providing one of the earlier signals for a potential trend reversal. I stress potential as, after all, even exponential moving averages are classified as lagging indicators.

Finally, a promising trade entry taken right now is on USDJPY.

screenshot-at-mar-02-01-22-22
USDJPY 4-Hour

Safe haven Yen holdings have been tested on the 4-hour time frame of a massive demand zone that overlaps a daily support. This level held up quite strong and broke through two sets of relative highs. This is, of course, partially influenced by the fundamentals. However, this gives us a good indication that the next major point of resistance is around the 115~ price level marking a relative resistance level on the daily time frame and also a whole number psychological barrier. Up until then, this pair remains a good short-term buy.

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