Near-term consolidation for USD

Near- to medium-term consolidation will help alleviate an overbought condition in the US Dollar Index (DXY) and allow for the resumption of the primary trend, according to Peter Lee, Chief Technical Strategist at UBS in New York.

Lee points out that the DXY confirmed a major breakout in November 2014, which ended its 30-year structural bear trend and marked the start of a sustainable cyclical or structural bull market. The current USD rally has gained 42% over the past 84 months and appreciated 27.23% from its most recent May 2014 low.

Lee says the breakout of a 9-year symmetrical triangle (above 85) suggests DXY can rally to 107-109 and this remains his longer-term target. However, on a near-to-medium term basis, Lee thinks a consolidation is now likely between 90-92 and 98-100. This will help to alleviate an overbought condition and allow for the resumption of the primary uptrend.

See chart.

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