Sunday, March 1, 2009

The Dollar May Go Sideways Next Week! Possible Retracement Ahead.

Candle wick burning.
The dollar has remained well bid against yen with the February candle forming a decisive confirmation of reversal pattern with a close above 97.50. The USDJPY is however showing a possible short term rebuff of the uptrend, as the February 27 candle has formed some sort of a Dark Cloud Cover signifying a market weakness and a possible near term slide.

I have however some misgivings about this since on the daily candlestick chart, the February 27 candle was an end of the month candle and had a long tail downwards which touched support at 96.55. Being an end of the month candle, the February candle tells us that some book squaring may have occurred last Friday which pushed the price to the 96.55 low.  The dollar however recovered after that to close at 97.50 although way off the day's high and opening price. What it tells us is that there were traders who took the dollar's dip to 96.55 as an opportunity to buy into the dollar against yen once more.

I see the dollar running sideways in the early part of March, maintaining an effective range of 96.55 on the low end and 98.75 on the high. I still maintain that the bullish outlook for the dollar is intact and it will be targeting the 108.00 level before a major pullback can be expected again.

Next week, we will see the unemployment numbers once more.  I doubt though that  the market will  even pay attention to them or simply shrug them off, and taking the dips caused by unimpressive future data as buying opportunities. At worst, unimpressive employment numbers will only drive the dollar sideways against the yen. Also next week, we will see treasury secretary Geithner testify on the treasury's massive budget. But again, the market will not look at the numbers, but will instead weigh President Obama's financial dream team's resolve to turn around the economy.

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