Divergences hint at dollar exhaustion
Repeats with no changes
Nov 14 (Reuters) -The dollar has been firmly in the driver's seat since the U.S. election and is now challenging the 2024 highs, though, with technical divergences appearing across the major currency pairs as they test crucial levels, the move is beginning to look somewhat exhausted.
U.S. CPI printed in-line with expectations, which should keep the Federal Reserve on course to cut rates further at the December meeting. However, with another payrolls and inflation report due before the next FOMC meeting, markets are unlikely to rule out the risk of a rate pause.
For the dollar, the higher high in the index has not been backed by the daily RSI, thus showing a bearish divergence. This offers a slight hint that the move in the greenback may be petering out.
EUR/USD has fallen to fresh 2024 lows, nearing key support at the 1.05 handle, CAD has found support at 1.40, AUD is overshooting on the downside versus the yuan and USD/JPY is through 155, which is likely to raise concerns among Japanese officials.
All of which suggest that the chasing dollar higher from current levels is beginning to look unfavorable from a risk-reward basis. Therefore, it would not be surprising to see dollar bulls take some chips off the table.
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usd daily chart https://tmsnrt.rs/3Co4Umd
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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