Pending the forthcoming corporate results, investors are struggling to find anything juicy to sink their teeth into. Fortunately, we can always count on the Donald to liven things up with his now famous carrot and stick strategy. Despite a slight dip in the dollar last Friday, the overall scenario of a recovery does not seem to have been undermined. The chart below shows the EUR/USD on a weekly basis. After hitting the upper limit of its upward channel thanks to a Japanese candlestick reversal pattern (shooting star), it is now the turn of indicators to add fuel to the fire. The RSI has broken the neckline of a head and shoulders pattern (yes, chart patterns also work on mathematical indicators), which leaves room before rallying to support around 35. Weeks or even months of consolidation are now expected. The most skeptical will wait for a break of 1.1500 (99.50 in parallel on the dollar index) to be more categorical, but this will be at the expense of the risk-reward ratio, as the immediate downside potential is around 1.12 (1.1215/1.1185 to be more precise). In the longer term, the target is 1.0820/1.0785.
Source: Bloomberg
Elsewhere, the USD/JPY remains well above 150, with 154.15/50 in its sights. The USD/CHF has exceeded 0.8000, confirming a continued rebound towards 0.8150 or even 0.8350. However, this is clearly not the best vehicle for "playing" the bullish dollar scenario. On the commodity currency side, USD/CAD rallied to 1.404 and remains well positioned above 1.3830 for a continued rise towards 1.4155. The Aussie broke through its first support level at 0.6520 and should head towards 0.6425/00. Similarly, the kiwi is on track to rally to its target of 0.5690, where it should stabilize. However, it should be noted that a clear and decisive break below this threshold will send the currency back to its April lows of 0.5505/0.5485.
