FX And Oil Week Ahead: Dollar Bears About To Be Bulldozed?

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Includes: BNO, DBO, DNO, DTO, FXA, FXB, FXE, GLD, OIL, OILK, OILX, OLEM, OLO, SCO, SZO, UCO, UDN, USDU, USL, USO, UUP
by: The Market Master

Summary

Dollar Index lean has turned bullish.

Gold multi-week decline likely in play.

WTI bullish breakout shaky but intact.

The Fed undoubtedly shared the recent optimism in markets, with Fed Chair Janet Yellen signaling a likely rate hike at the coming March 15 FOMC meeting. Given the current hawkish rhetoric and expectations built in, the Fed is unlikely to disappoint in the upcoming March meeting, barring an unexpected shock to the employment numbers this coming week. Given the current jobless claims trend, it is likely that the number should come in around or higher than the 190k mean estimate at this juncture.

Trading and Technical Strategy for the week ahead:

Dollar Index, DXY (UUP, USDU, UDN, FXE, FXB)

Charts created by themarketjournal, data provided by SAXO markets

Key Levels
Support: 101.10/ 99.68/ 98.40/ 97.12
Resistance: 104/104.50/ 105.25/ 106
*Level to consider buying at for support and selling at for resistance for intra-day trades

The USD continued exhibiting resilience, and the previously overbought indicators have now reset. Given the current technical setup, it is likely that the DXY should see a small consolidation in the coming week before the breakout move expected to the upside. A bullish FOMC statement should provide the catalyst needed for the coming bullish move.

Trading strategy:

We continue to view the Australian Dollar (NYSEARCA:FXA) as the ideal currency to bet against the dollar, given challenging data in the recent months. We think the 0.7650/80 level is an ideal level to establish a short position, with an open target to the downside, and a stop loss at 0.7740.

XAU/USD (NYSEARCA:GLD)

Charts created by themarketjournal, data provided by SAXO markets

Key Levels
Support: 1205/ 1170/ 1130/ *1100/ 1050
Resistance: 1245/ 1265/1280/1305/1330/1360/1400
*Level to consider buying at for support & selling at for resistance for intra-day trades

GOLD failed to reach the 1277 target to the upside, and may have already started its multi-week decline this past week. The current level for gold to stay under is the 1249 level. This coming week should give a tradable pullback to sell short the precious metal.

Trading strategy:

We think a pullback to around 1238 should provide a good opportunity for traders to sell short the metal, with a stop loss at 1250, and a target of 1210 to the downside. The coming FOMC meeting will be the likely catalyst for this move in our view.

WTI OIL (USO)

Charts created by themarketjournal, data provided by SAXO markets

Key Levels
Support: 52.60/ 51.30/ 50.20/ 49.80/ 49/ 48.30/47.15/ 46.30/ 45.30
Resistance: 53.80/ 55/ 56.20/ 57/ 58.50
*Level to consider buying at for support & selling at for resistance for intra-day trades

*Note on our price chart: Before we dive into the WTI technical analysis, we have decided to use the WTI continuous futures price as a chart instead of the original spot price posted in our article. This price will match the nearest dated WTI crude futures contract which will switch automatically once the contract settles, moving on to track the next nearest dated futures contract. We will also be only analyzing the technical aspect of the WTI price, given the fundamental aspect of WTI oil is well covered by many subject matter experts in the energy commodities section. At this time, the nearest dated futures contract being tracked by the above price chart is the April 2017 contract.

WTI oil broke out technically to the upside, and may now move toward the $59.63 level to the upside. We think that it is worth participating in the bullish momentum at this stage, as the risk vs. rewards are quite clearly defined in the commodity at this time.

Trading strategy:

We think position traders should wait for a pullback to around $53 to go long the commodity, with a stop loss of $51.50 to the downside, and an upside target at $59.63. A break of $51.50 would indicate a multi-week decline in WTI is in order. For more trading updates and event-driven ideas, please join our mailing list.

Risk Disclosure:

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.