Analys från DailyFX
US DOLLAR Technical Analysis: Dollar Facing 2016 Lows As Data Picks Up
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Talking Points:
- US Dollar Technical Strategy: US DOLLAR Failing at 200-DMA
- Fed Rate Hike Probability Creeps Back Into
- Risk-On Could Be the Short-Term Ruin for US-Dollar. But, Will It Last?
Do not look now, but the US Dollar is close to printing 2016 lows. We have a scenario on our hands that is uniquely different to 2015 at the same time of year. Last year, the US Dollar was a run-away train into the Ides of March, and then the Fed came out to tell markets that the Fed would not harm the world with a Strong Dollar on their own accord. From there, on March 18 the US Dollar started a steady multi-month decline until August 24 or Black Monday of 2015.
One theme we have seen since the US Dollar produced a lower high is a risk-on rally. Specifically, we have seen stocks and US Oil push closer and closer to 2016 highs. The scenario we see at hand is that traders who bought US Dollar via Treasuries as a safe-haven are quickly dumping US Dollar to buy equities and Oil in case the bottom is in place. Therefore, if risk continues higher and higher, the Dollar may move lower lower. The counter-balance to this would be risk-sentiment falling apart, and the Fed pushing the reference rate higher as economic data has picked back up since February.
US Dollar Takes a Back Seat To Risk-Rally Seen in Equities Oil
The chart above shows the US Dollar coming off a lower high that aligns with the late 2015 high. Many will look at this as a bearish head and shoulders that has more downside ahead. That is completely fair and a close below the 200-DMA below 12,050 would likely further that cause for a bearish US Dollar unless the European Central Bank and Federal Reserve decides to muddy the water and change the current risk-paradigm.
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Key Levels: Watch the 200-DMA
The US Dollar is getting no respect as US Data picks up, which is exactly why it’s helpful to keep an eye on key levels. The first key level to focus on that was consistent support in 2H2015 is the 200-dma. If the 200-DMA acts as resistance, we could have a clean move down to 11900/850.
The big scenario to watch for is a slingshot move higher after a temporary stay below the 200-DMA. We saw this scenario in October of 2015 that preceded the US Dollar’s strongest move of the year since the Q1 Rally. The obvious resistance is 12,214, the late February high. Until that level is broken, it will be difficult to get on the US Dollar train unless risk, as seen via WTI Crude Oil collapses in which then, US Dollar could resume its ascent.
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
You can receive Paul’s analysis directly via email bysigning up here.
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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