USD is already in zone of overbought.. what can we expect

07.05.2018 / 02:22

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The U.S. dollar just hit its highest levels since late December, a move that's planted it in overbought territory, according to one chart watcher.

On a very short-term basis it's getting a little ahead of itself. RSI, a measure of momentum, hit 76.07 on Wednesday, surpassing the one-year peak hit in October. Unlike last year's attempt to rally, the technicals suggest gains over the past month are a little different.

The rally has been much stronger. It took it above its 200-day moving. Also, above its trend line going all the way back to the highs in very early 2017. When you combine that with the kind of positioning we see where a lot of people are very short the dollar and very long currencies like the euro, I think that this kind of next pullback will be a little bit more shallow and could take the dollar higher.

"U.S. economic growth and the expectation for higher interest rates should also give the rally in the dollar more fuel. We're well into the recovery at this point and, in fact, Europe has largely peaked out, Japan has peaked out. However, the U.S. is continuing to expand and I think that that is very, very supportive of the expectation for higher interest rates." said Gina Sanchez from Chantico Global.

The U.S. economy grew at a 2.3 percent pace in the first quarter of this year, level with full-year economic growth in 2017. Japan's economy expanded 1.7 percent in 2017, while euro zone GDP increased 2.5 percent.

We're actually seeing inflation come in at Fed-expected levels whereas European inflation is starting to disappoint. That's also going to be supportive of a higher dollar from here."

Source: Bloomberg Pro Terminal

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USD is already in zone of overbought.. what can we expect

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