Analys från DailyFX
US DOLLAR Technical Analysis: The Day the Dollar Died?
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Talking Points:
- US Dollar Technical Strategy: Downside Exhaustion Soon To Be Revealed, Buying Dips
- The Lack of Volatility on the Upside Led to a Washout
- Seasonal Tendencies Favor USD Weakness for February, Score one for seasonality
Is everyone all right? It is a pertinent question to ask after a quiet market in G4 FX, aside from negative interest rates à la Bank of Japan and their Japanese Yen whose losses have now been completely erased, were awoken from yesterday’s G10 shake-up.
To see how FXCM traders are positioned after such a big move, click here.
What’s odd is that the kick-off to this event was an interview with Federal Reserve Bank of New York President William Dudley noted that financial conditions have tightened since December (not news), which could weight on FOMC. However, the US 2yr Treasury Yield has fallen over the last month to levels that show expectations by the market that the Fed would fight to raise rates once this year.
Second, we had a weak, all right very weak, Non-Manufacturing ISD read yesterday morning, which helped further the US Dollar route. However, the market appears confused due to what currencies were strong yesterday. The Japanese Yen and the highest yielding currencies like Emerging Markets and Commodity Currencies, which are often inversely correlated, both were top performers yesterday.
Such a divergence among top performers (risk-on and risk-off), help to show that the FX market is confused. Either way, the FX market is now in desperate search for a leader. Given the fundamental backdrop, FX will have a hard time looking to the EUR as the March 10 ECB with 100% market expectation of easing as per OIS, and the Yen’s Kuroda re-emphasized this week that they would not stop at -0.1% interest rates if needed.
In other words, let the volatility begin.
Key Levels: Watch the Recent Pivot to Hold
For now, the key support level on the US Dollar has turned quickly to the 200-dma at 12,021. While prior supports have been ripped like a rock dropping through wet paper, the 200-DMA at 12,021 comprises of the Ichimoku cloud and 61.8% Fibonacci retracement of the October-January range.
We recently said in the Dollar Bull Dilemma that short-term weakness was favored, but we were surprised what happened in the short-term. Now, as key support levels are being tested, we could see what the trend is made of in terms of longevity. Unless yesterday’s move was driven by a ‘behind the curtain’ Central Bank move, the market will likely soon favor USD again.
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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