Analys från DailyFX
US DOLLAR Technical Analysis: Steady FOMC Supports Dollar Uptrend
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Talking Points:
- US Dollar Technical Strategy: Buy the Dip Above 21-DMA at 12,213
- Boring Bull Trend Favors Slow Grind Higher
- Seasonal Tendencies Favor USD Strength for January
Much of the excitement and fear of further Dollar strength has subsided, but that does not mean it should be done for the year. Further, the US Dollar index has stopped it’s direct ascent as a mean-reversion move has taken place in markets like WTI Crude Oil the Canadian Dollar. However, mean-reversion is a different animal than a reversal, and latter is much less likely especially with today’s Fed Statement.
Stocks sold off after the Fed announcement, even though they held rates on Wednesday because the Federal Reserve noted they noted being forward looking about the inflation risk. Yes, there is turmoil in financial markets, but when policy makers said they still expect to raise borrowing costs at a “gradual” pace keeps the US Dollar on a bullish track in an environment where no other economy or central bank is close to this type of hawkishness.
Right now, it appears the main risk to the US Dollar dominance, aside from Japanese Yen strength due a risk-off environment, would be another hawkish central bank stealing the thunder from the Fed, which appears increasingly unlikely as global growth and inflation stalls.
The key support level on the US Dollar remains the 21-DMA, which is swing support for short-term and medium-term traders and currently stands at 12,213, which is near today’s low. A persistence hold above the 21-DMA shows that there is not enough force to take the US Dollar down. Stronger support would be found at the 2016 Opening Range low at 12,110. A break below that level would open the conversation for a larger US Dollar reversal and would likely come alongside a shift in the Fed’s expected rate path.
Given the potential for the Bank of Japan to expand easing on January 29, and the European Central Bank to follow suit in March, the Dollar dominance could continue throughout Q1 2016.
To see how FXCM traders are positioned, click here.
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.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
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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