Analys från DailyFX
Dollar Technical Analysis: A Steady Fed Is Frustrating Dollar Bulls
Talking Points:
-Dollar Technical Strategy: sitting on LT trend support, breakdown 99 opens up downside
-Previous Post: Dollar Technical Analysis: Recent Hikes Have Led To Peaks in DXY
–Mass exodus of institutional USD Bulls in Eurodollars likely to worry DXY Bulls
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Welcome to the world of dovish hikes. Though Janet Yellen hiked rates and released the Dot Plot to show the Fed expects to raise rates two more times in 2017, the Dollar fell against a basket of significant trade partners to the lowest levels since Feb. 8 on Monday. The uptrend that began in May remains intact but also looks to be hanging by a thread, and a break below 99 could open up a further flood of USD selling.
It was revealed on Friday afternoon via the Commitment of Traders report from the CFTC that institutions were holding a record short in the Eurodollar futures market. A short position is a bet on a rising London Interbank Offer Rate that is based on USD Funding costs. Therefore, a short Eurodollar position, which was sitting at record levels was a hawkish trade that failed. The failure was mainly due to the Fed not lifting their expectations and one Fed Member, Neel Kashkari, opting not to raise rates.
As the record Eurodollar short position comes off the market, there is likely to be a ripple effect that leads to a softer USD in coming days andlingering questions as to what will be the catalyst for the Bulls. We’re going to have a slate of Fed speakers this week with Yellen (Thursday) and Bullard (Friday) acting as key complements to the light data week with Durable Goods being released on Friday. Any failure from them to produce hawkish intentions could lead to further USD weakness that goes to show, even institutions make poor trades now than then.
Technical View: The level worth keeping tabs on in the DXY looks to be 99.23, which is the February low and a little greater than 1% away from spot on Monday afternoon. For a breakdown in DXY to occur, we’d likely need to see a sharp rise in the heavily weighted EUR (57.6% of DXY basket), which is fully possible given the US/German 10-Yr yield spread is near the narrowest level in 3-months, which favors EUR strength.
Additionally, we’ve seen the options market show a lack of EUR fears with the one-week EUR/USD 25d risk reversal touching +0.02 early Monday, which is the first positive read for the option sentiment gauge since November 11. There is a natural fear and bidding up for downside protection two months out near the French election, but that is a one-off event risk that if it fails to play out (pay out for Puts), could put demand under EUR. For traders looking for life in the greenback, resistance comes in at 101.01, the March 13 low. A break above 101.01 would show an overlap from a previous downtrend that could mean a break higher is developing and should be co-joined with EUR weakness. However, a failure for the price to surpass 101.01 could mean upside remains limited, and further downside favored.
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Chart created by Tyler Yell, CMT
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Shorter-Term DXY Technical Levels for Monday, March 20, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.
T.Y.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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