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U.S. DOLLAR INDEX

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U.S. dollar strength is here to stay. Greenback had a strong recovery last week. Strong dollar will continue to put pressure on commodities, commodity currencies and also emerging markets. In other words, weak emerging markets, commodities and strong U.S. Dollar trend is likely to continue in the following months.

After its breakout from a decade-long consolidation in the last quarter of 2014, U.S. Dollar index rallied from 85 to 100 levels. Since March 2015, price has been pulling back to the strong support at 92 levels. Last week, the dollar index tested the strong support and rebounded sharply. Latest consolidation is more like a counter trend move in the context of a short/medium-term correction. Uptrend in the U.S. Dollar remains intact and once the choppy sideways consolidation is over we can expect the continuation of the uptrend.

US DOLLAR INDEX

MAJOR U.S. DOLLAR CROSS RATES

EURUSD

USDSGD

U.S DOLLAR VS. SINGAPORE DOLLAR

USDSEK

U.S. DOLLAR VS. SWEDISH KRONA

USDNOK

U.S. DOLLAR VS. NORWEGIAN KRONE

USDCAD

U.S. DOLLAR VS. CANADIAN DOLLAR

USDJPY

U.S. DOLLAR VS. JAPANESE YEN

GBPUSD

BRITISH POUND VS. U.S. DOLLAR

NZDUSD

NEW ZEALAND DOLLAR VS. U.S. DOLLAR

AUDUSD

AUSTRALIAN DOLLAR VS. U.S. DOLLAR

USD/SEK (US DOLLAR/SWEDISH KRONA)

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Currency traders should pay attention to this pair in the next few weeks. Though not a widely traded crossrate, USD/SEK can offer great opportunity if dollar strength continues. I like to look at volatility on daily charts and when I see low volatility combined with beautiful chart patterns I start following them for possible breakouts. USD/SEK has one of those nice chart patterns giving us bullish signal both on the daily and weekly scale. On the weekly scale which is the first chart on this post we can see an inverted head and shoulder pattern forming in the past one year with the neckline at 7.02 levels. A breakout above 7.02 will confirm the inverted H&S pattern and this will be extremely bullish for US dollar versus Swedish Krona.

On the daily chart USD/SEK formed an ascending triangle for the past 2 months. It has a horizontal resistance at 7.02 which is also the neckline of the inverted H&S pattern. We are definitely close to a breakout given the extreme low volatility. You can check my previous copper analysis to visualize what can follow after these type of low volatility periods (http://techcharts.wordpress.com/2012/01/05/copper/) I would suggest waiting for the breakout to take place in order to have confirmation. This chart should be on your watch list.