The FED minutes support the Dollar

The Dollar started the trading day pretty strong and the bullish momentum expanded even more when the Federal Open Market Committee made public its minutes from the last FED meeting. A couple of points that were mentioned made the Dollar rally, like for example, most members of the committee agreed that the FED should keep reducing its asset purchase program at a steady and predictable pace. The other point was that most probably interest rates will rise in the US before anticipated if the economy keeps showing signs of improvement, especially in the labor market.

This has caused the Dollar to reach an 11 month high versus the Euro and versus the Yen is very close to touching the 104.00 level. If the strong fundamentals persist out of the US, then there is no telling on how high the greenback may rise.

The EUR/USD is a few pips shy of touching the 1.3300 level

The Euro keeps dropping versus the Dollar and it has broken 9 month lows around the 1.3315 level. It just needs to drop a few more pips to visit the 1.3300 round number level. Due to the fact that the price has not visited that level in a long time, if we do see a visit to that level, there is a good probability of seeing a bounce to the upside. But for now investors are focused on the Jackson Hole meeting and how it may affect the greenback, because if the US fundamentals keep supporting the Dollar, then we may see the EUR/USD breaking new lows.

Possible visit of the NZD/USD to the 0.8400 level

The New Zealand Dollar versus the US Dollar has been dropping and it is getting close to the 0.8400 round number level. Let’s see if a visit to that level will make the price bounce to the upside. There are a couple of good resistance levels to the upside. We can see the other round number level of 0.8500 and the 200 Day Exponential Moving Average. Due to the current consolidation that the price is having, we can see that there is a possible Inverted Head and Shoulders chart pattern forming, but it still needs more time to complete.

Russian-Ukrainian tensions heat up again

While the markets were ending the week relatively calm due to the good-hearted intensions of Russia to allow a humanitarian convoy to cross into the Ukraine, things got hot again when the president of the Ukraine announced on its Web portal that the Ukrainian army had destroyed an armored Russian column that penetrated into Ukrainian soil.

This has caused risk aversion to come back into the markets and the Yen, as a safe haven bid, has started to gain some ground. The Euro and the Pound stay near lows one more time, mostly because of the risk-on mood in the markets together with the Russian Ruble.

The S&P 500 stays in an uptrend

The U.S. stock markets have been enjoying a good rally recently, due to the better than expected fundamentals, which have shown that the American economy is in a sustainable recovery. On the weekly chart of the S&P 500 we can clearly see how the index has kept a well-defined uptrend. We can also see something very peculiar; that is that when the weekly candle closes in a Doji formation, the following weeks tend to be bullish. Last week’s candle closed in a Doji formation and this week we have seen the price heading higher. Could this be a signal that next week will also be bullish? Let’s wait and see if we do get a breakout above the 1985.26 level for next week.

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Basic Elliot Wave Pattern

Breakout and Pullback on the GBP/USD, 1 hour chart

The Pound has been gaining a lot of ground versus the Dollar for today and it managed to break above the 1.6800 level. On the one hour chart we can see how the price broke that level and it is currently trying to pull back to the same level. This is a very good example of how the Breakout and Pullback pattern should look. First we see confirmation of the breakout and then a nice retracement with the shape of a “dome”. This type of retracement has a higher probability of working and if we see a visit to the 1.6800, the price may try to bounce to the upside from there and continue going higher. The next resistance would be the 200 period exponential moving average around the 1.6835 level.