By Jamal Mecklai

The dollar has corrected quite dramatically since January 20 following the old adage, “buy the rumour, sell the fact”. It had been rising steadily (by about 6%) since September last year when it began to appear that Trump would win the election and, on the day he took office, it turned sharply lower.

The DXY is now down more than 2.5% in less than a week, and technical analysts are scratching their heads as they see a possible run much lower as any further decline could open up an expanding range of head and shoulders patterns that could take the DXY down all the way to below 100. If, for instance, it was to fall a little more, correct upwards slightly, and then fall below the neckline that would be formed at 106.90, it would open the technical road to a decline to 103.80; in turn, this could set up another head and shoulders with the head at 110 and the drop aimed at around 97.

To be sure, technical analyses, like any “scientific” analysis of markets, or, for that matter, anything else, often turn out to be full of holes. But I point this out since it is in sharp contrast to most widely held views, and in markets, as (again) in life, you need to recognise that anything can happen.

Turning to the US........

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