U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 99.200 Pivot Sets the Tone

The U.S. Dollar is edging lower against a basket of major currencies on Tuesday while trading inside yesterday’s range. The price action suggests investor indecision and impending volatility.

Based on the price action since Friday, investors are trying to decide whether the dollar is strong because of its safe-haven status or overpriced due to signs of a weakening U.S. economy.

On Friday, the dollar index sold off sharply after the release of disappointing U.S. manufacturing and services reports. Yesterday it closed higher, but showed little signs of safe-haven status as U.S. equity markets plunged.

Today’s price action is likely to be influenced heavily by the Conference Board’s Consumer Confidence report, due to be released at 15:00 GMT. It is expected to come in at 132.6, up slightly from the previously reported 131.6. This report is important because the consumer has been the main driver of the economy.

Some traders may discount the results because conditions have changed drastically since the survey was taken. It’s highly likely that the CB survey was taken when all investors had to worry about was China’s containment of the coronavirus. This report may not reflect the fact that the virus has now spread beyond China’s borders and has become a major threat to the global economy.

At 11:39 GMT, March U.S. Dollar Index futures are trading 99.235, down 0.049 or -0.05%.

Daily March U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 99.815 will signal a resumption of the uptrend. The main trend will change to down on a trade through 97.165. This is highly unlikely, but there is room for a normal 50% to 61.8% correction of its last rally.

The minor trend is also up. A trade through 98.580 will change the minor trend to down and shift momentum to the downside.

The minor range is 98.580 to 99.815. The market is currently straddling its 50% level or pivot at 99.200.

The short-term range is 97.165 to 99.815. Its retracement zone at 98.490 to 98.180 is the primary downside target.

Daily Technical Forecast

Based on the early price action and the current price at 99.235, the direction of the March U.S. Dollar Index the rest of the session on Tuesday is likely to be determined by trader reaction to the pivot at 99.200.

Bullish Scenario

A sustained move over 99.200 will indicate the presence of buyers. However, given the series of Gann angles on the upside, any rally is likely to be a labored event.

The index will strengthen on the bullish side of the uptrending Gann angle at 99.290, but then buyers face potential resistance at downtrending Gann angles coming in at 99.440, 99.630 and 99.720. The latter is the last potential resistance angle before the 99.815 main top.

Bearish Scenario

A sustained move under 99.200 will signal the presence of sellers. Taking out yesterday’s low at 99.030 will indicate the selling is getting a little stronger.

The daily chart indicates there is plenty of room to the downside with targets coming in at 98.490, 98.395, 98.230 and 98.180. However, we don’t know at this time if the index will spike into these targets or plunge.

USD/CHF Price Forecast – USD/CHF Further Confirms Bullish Reversal off Bottom and Next Heads Towards 0.9865

A stronger U.S. dollar helped the USD/CHF pair advance by 0.0024 or 0.24% Tuesday, to close at 0.9832.

Uptrend Resumes Following Shallow Pullback

Yesterday’s weakness in the USD/CHF pair didn’t last long as support was found just above the 38.2% Fibonacci retracement at 0.9797, as seen on the enclosed 4-hour chart, before buyers stepped in more aggressively to propel the pair to new trend highs. That’s a relatively shallow retracement and indicates underlying strength in the pair.

USD/CHF Daily Chart

Bullish Reversal from Bottom has Higher Targets

The current advance is a continuation of an inverse head and shoulders breakout from last week with a minimum target at around 0.9923. Together with the 78.6% Fibonacci retracement at 0.9934, the two prices can be considered as a target zone.

Moreover, depending on when price reaches the target zone, if it is to do so, the downtrend line will be merging with the zone. The line can then be used as another indicator to watch for possible resistance. At the same time, a decisive advance above the 0.9934 price level, will be bullish.

Given the shallow breakout and relatively rapid continuation into new trend highs, indications are that the target could eventually be reached.

Dollar Strength Relentless

Strength in the dollar helps the USD/CHF. The U.S. dollar index reached a new trend high today as it accelerated to test prior monthly highs. It ended strong and is now testing the tops of the long-term uptrend from September/October of last year. There is no end in sight to upward momentum, indicating the prior highs could be exceeded in the near-term, which should help the USD/CHF pair.

Coronavirus Fears

The death toll from the virus outbreak rises to 2,000, with more than 72,000 people infected globally. Along with the rise in the death toll and infections, Apple reported that they will miss their revenue estimate for the first quarter ending in March due to the impact from the virus. Investors now fear the outbreak will hurt earnings of other major companies and are looking for safety.

USD/CHF 4-Hour Chart

USD/CHF Breaks above 50% Retracement

Next, watch the reaction to price around the 61.8% Fibonacci retracement at 0.9869. Today, the 50% retracement was breached thereby increasing the likelihood the 61.8% level will be touched, at a minimum.

Also, notice the 21-period exponential moving average (ema) purple line on the enclosed 4-hour chart, and how it acted as support, roughly, during the most recent pullback. Therefore, it can be watched going forward to indicate dynamic support of the trend or for signs of more significant weakening during retracements, if price breaks below it.

USD/CHF Price Forecast – Swiss Franc Advances Following Last Week’s Poor Performance

Following last week’s weak poor performance against the U.S. dollar, the franc recovered some on Monday. However, it remains vulnerable to additional depreciation given the recent price structure of the USD/CHF pair.

USD/CHF Daily Chart

The USD/CHF pair fell by 0.0011 or 0.11% to close at 0.9818 on Monday as it pulled back following last week’s bullish breakout of an inverse head and shoulders reversal pattern. Resistance was seen around the 50% retracement level following the breakout and a deeper pullback is certainly possible before we see a continuation of the bullish move.

U.S. Bank and Stock Market Holiday

Overall market liquidity was low given that U.S. banks were closed for the President’s Day holiday, as well as stock and bond markets. China’s central bank loosened capital as it will now allow banks to increase the number of non-performing loans on their books.

Higher Targets

Assuming the inverse head and shoulders trend reversal pattern holds up, and there is no evidence so far to indicate that it won’t, short-term weakness can be used to enter a new position or add to an existing position. As long as price stays above the right shoulder at 0.9629, the pattern remains valid.

Minimum potential target calculated from the size of the pattern is approximately 0.9923. That would put the pair close to the downtrend line coming off the April 2019 peak and shows that there is still upside potential for the USD/CHF.

Other targets include the 61.8% Fibonacci retracement at 0.9869, and the 78.6% Fibonacci retracement level at 0.9929. Further, we can combine the pattern target with the 78.6% Fibonacci price to get a relatively tight range from around 0.9923 to 0.9929.

USD/CHF 4-Hour Chart

Using Intraday Price Patterns

Given higher potential targets, an intraday price pattern can be used to stalk the USD/CHF for new entries or to add to a long position. It looks like price could soon test support of the neckline or other price levels, such as the Fibonacci retracement levels shown on the enclosed 4-hour chart.

Key support is at the right shoulder of the pattern at 0.9629, but it is quite a ways down to use for a protective stop. A tighter stop to provide better reward to risk can be looked at on the 4-hour chart around the higher swing low at 0.9741.

Swiss Franc Tries To Recover

New week starts with the strengthening of the Swiss Franc but the whole February is so far pretty bad for this currency. CHF is currently on the bearish territory on almost all pairs, with the further negative outlook on the future.

Let’s look at the USDCHF first. Here, we do have a very handsome inverse head and shoulders pattern. Formation is already active, as the price broke the neckline of this formation and also already tested that line as a closest support. As long as we stay above the orange area, the sentiment is positive.

On AUDCHF, we also have an inverse head and shoulders pattern. Neckline and the mid-term down trendline were already broken. The only obstacle left is the horizontal resistance around 0.661. Price breaking that resistance, will confirm a strong bullish sentiment here.

Now let’s look at the whole Swiss Franc index. Most recent weakness should not be a surprise as the index broke the mid-term up trendline. Current rise should also not be a surprise as the CHFX met crucial, mid-term horizontal support. As long as we stay above, CHF has a potential to develop this bullish bounce but the major long-term sentiment is still negative.

USD/CHF Potential Retracement as the M H5 Level is Broken

Dear Traders,

The USD/CHF is at highs. Due to the ATR resistance we might see a drop soon. The M H5 has been hit too.

The price has broken above M H5 level at 0.9786. This means that we might expect a retracement although a shallow retracement already happened after a pink dot showed up. Now we might see another retracement within 0.9829-40 zone towards 0.9798. Due to low ATR, targets are 0.9792 and 0.9766. For bulls, 0.9850 should be hard to break as the EUR/USD might go up soon.

The Analysis has been done with the CAMMACD.Core and Sit Systems

 

USD/CHF Price Forecast – USD/CHF Reaches 50% Retracement Following Bottom Breakout

U.S. dollar continues to strengthen against the Swiss franc with the USD/CHF pair advancing 0.0024 or 0.25% today to close at 0.9818. Investors looked to lower risk by moving into the dollar, as new cases of the coronavirus outbreak in China grows.

Week Ends Strong

The pair ended the week at an 8-week high, closed near the high of the week’s range, and ended above the 21-week exponential moving average (ema), purple line, for the first time in 11 weeks. These are all bullish indications.

USD/CHF Daily Chart

Coronavirus Outbreak Takes a Toll

It was reported today that at least 1,700 health care workers in China have been infected with the coronavirus, and six have died so far. Authorities reported 5,000 new cases on Friday. To date, there are 64,000 confirmed cases of the virus worldwide.

Inverse Head and Shoulders Bottom Breakout

The main technical driver for the USD/CHF pair is the breakout of an inverse head and shoulders reversal pattern that finalized on Thursday. Confirmation of strength was also seen in the 55-day ema as it began to turn up after being down and then flat for more than two months.

The formation of the bottom pattern was accompanied by a bullish divergence with the Relative Strength Index (RSI) momentum indicator.

Watch for further signs of strength when the 21-day ema (purple line) crosses above the longer term 55-day ema. The 21-day has been below the 55-day since early December.

USD/CHF Weekly Chart

Friday’s advance stopped around the 50% retracement of the prior downtrend. There were no signs of rejection at that price level as the pair closed strong and near the high of the day, which is also the high of the week. Therefore, watch for price to continue to advance towards higher targets.

Higher Price Targets

Once this week’s high at 0.9822 is exceeded with conviction the USD/CNY moves towards the 61.8% Fibonacci retracement zone at 0.9869. That level matches with resistance from a previous support area, and now resistance.

After that, watch the 0.9923 to 0.9939 price zone, consisting of a target derived from measuring the head and shoulders pattern along with the 78.6% Fibonacci retracement, respectively.

Accumulate on Weakness

Given higher targets in the pair, weakness can be used to accumulate. A pullback to test prior resistance as support, around the neckline of the inverse head and should pattern and 55-day ema, now at 0.9765, would not be unusual.

USD/CHF Price Forecast – Bullish Inverse Head and Shoulders Breakout in USD/CHF

 

Investors looked for safety today in the U.S. dollar and Treasuries as the number of people infected by the coronavirus in China skyrockets by almost 15,000 after authorities adjust their methodologies for recording those infected with the virus. Given the continued uncertainty as to the impact of the virus on the economy of China as well as globally, investors chose to play defensive.

USD/CNY Daily Chart

Today’s Performance

The USD/CHF pair advanced by 0.0012 or 0.12% to 0.9793 on the day, reaching a seven-week high. This move saw the pair rise away from support of the 55-day exponential moving average (ema) orange line where it has been hovering for the past several days.

Bullish Breakout of Inverse Head and Shoulders Pattern

Today’s advance also confirms a breakout of a bullish inverse head and shoulders pattern that formed near the recent lows (0.9613). It follows a 4.09% decline off the 1.0023 swing high from late-November.

The neckline shows resistance of the pattern right around the same price represented by the 55-day ema. Therefore, today’s move further confirms a breakout of each, and each on its own is evidence for price strengthening. In addition, the Relative Strength Index (RSI) momentum oscillator is showing a bullish divergence as the head and shoulders consolidation forms, which is also a bullish sign.

USD/CHF Daily Chart

Although the pattern is not perfect, as the right shoulder bottom is higher than the left shoulder, it is valid, nonetheless.

Upside Targets

We can measure the inverse head and shoulders to identify a minimum possible target just based on the pattern. When taking the price difference from the bottom of the head (0.9613) to the neckline (0.9765) of 152 pips, and then adding that to the breakout level of approximately. That gives us an eventual possible target of around 0.9923.

It is interesting to note that the target looks to be roughly around the top downtrend trend line, where resistance could be anticipated separately. The price represented by the line however will depend on when the pair gets there, and if it does.

Validity of Pattern

The inverse head and shoulders pattern is valid as long as price stays above the bottom of the right shoulder, which is at 0.9629. A failure is indicated if price gets below therefore before rallying higher to some degree.

U.S. Dollar Index Futures (DX) Technical Analysis – Inching Through 4-Month High

The U.S. Dollar futures contract surged against a basket of major currencies on Monday, inching over its October 1, 2019 top at 98.735 in the process. In the cash market, the index moved closer to its October 1 top at 98.890.

Most of its gains were attributed to a weaker Euro, which fell 0.30%. Competition with the Japanese Yen over coronavirus hedging caused the dollar to lose 0.10% against the safe-haven Japanese Yen.

The catalysts behind the U.S. Dollar’s strength were optimism that the U.S. economy would remain resilient to the spread of the coronavirus across the world and more bad news about the Euro Zone economy.

The U.S. Dollar hit a four-month high against the Euro on Monday as weak data in the Euro Zone made the greenback a more attractive investment. The rout against the single-currency began on Friday when German industrial output suffered its biggest fall in December since the recession-hit year of 2009.

The weakness in the Euro continued on Monday after investor morale in the Euro Zone fell for the first time in four months in February over fears that China will not be able to contain the coronavirus outbreak. Sentix’s index for the Euro Zone fell to 5.2 from 7.6 in January. The Reuters consensus forecast was for a fall to 4.1.

At 14:29 GMT, March U.S. Dollar Index futures are trading 98.725, up 0.011 or +0.01%.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through yesterday’s high at 98.770 will signal a resumption of the uptrend. The main trend will change to down on a move through 97.165.

A change in trend is highly unlikely, but seven days up from the last main bottom puts the index inside the window of time for a closing price reversal top. This won’t change the main trend to down, but it could trigger a 2 to 3 pullback into a short-term 50% to 61.8% retracement zone.

The short-term range is 97.165 to 98.735. Its retracement zone at 97.950 to 97.765 is a preliminary downside target zone.

Daily Swing Chart Technical Forecast

Monday’s price action and the current price at 98.725 likely means the direction of the index on Tuesday will be determined by trader reaction to yesterday’s high at 98.770. The upside momentum is strong so we’d like to see the trend confirmed by a new higher-high.

Bullish Scenario

Taking out 98.770 will indicate the presence of buyers. If this creates enough momentum then look for the rally to continue into 98.890. This is a potential trigger point for an acceleration to the upside with 99.205 the next target.

Bearish Scenario

The inability to overcome 98.770 will signal the presence of sellers. Turning lower for the session will be another sign that the selling is greater than the buying at current price levels. Taking out Monday’s low at 98.490 will be another sign of weakness.

Side Notes

Due to the prolonged move up in terms of price and time, traders should watch for a higher-high, lower close. Taking out 98.770 then closing lower for the day will produce a closing price reversal top. If confirmed, watch for a 2 to 3 day break with 97.950 to 97.765 the next potential target zone.

CHF, JPY and USD Bought in Response to Virus Spread

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Hedge funds and other large speculators bought dollars for a second week as the Coronavirus uncertainty helped trigger renewed demand. Against ten IMM currency futures and the Dollar Index the dollar long rose by $2.2 billion to $6 billion, a four-week high.

The dollar buying was broad based with the exception being a 19% reduction in JPY shorts and a more than doubling of the CHF long to the highest since 2016

Leveraged fund positions in bonds, stocks and VIX

Speculators cut short positions in the Cboe VIX future (Ticker: VX) by 19% to 139k lots. Still an elevated and exposed position  considering the continued rise in volatility since last Tuesday. Adding to this a return to backwardation which has removed the roll-yield short sellers have benefited from in recent months.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

US Dollar and Gold in Tandem

In times of uncertainties – be it economical, political or policy uncertainties, investors generally seek safety with haven assets like the US dollar, Japanese Yen, Swiss franc or Gold. Our attention today is on Gold and the US dollar, both of which have had an interesting start to the year so far.

Gold

Major equity indices reached fresh record highs in January. Yet, gold price remains in elevated levels around $1,550. It is a situation of “cautious” risk appetite.

The narrative is simple. Investors are still navigating in an environment with high levels of uncertainties, despite easing trade tensions and receding recession fears:

  • QE and record low-interest rates
  • Geopolitical tensions
  • Global growth uncertainties
  • Growing global debt
  • China’s commitment to Phase One

Major central banks are pumping money into the economy through quantitative easing and are reducing interest rates to stimulate the economy, hence driving demand for riskier assets. Hard assets like gold are therefore generally sought as investors are hedging against poor fundamentals and the long-term headwinds.

Currently, the fears that the Coronavirus may spread to more countries and dent economic growth are also boosting the short-term outlook for gold.

US Dollar Index

We are seeing a stronger US dollar but the greenback acting as a safe-haven will likely face some limitations. The Federal Reserve cut interest rates three times last year, mainly due to weaker global growth and trade tensions.

Lower rates and still a stronger US dollar?

The US dollar is gaining a competitive advantage over its peers in the currencies market. The US economy is stronger and the Fed is considered to be less-dovish than other central banks. While some might still need to reduce interest rate further in 2020, the Fed is expected to remain on pause with the expectations of being among the first central banks to be able to start hiking again in 2021.

The Tandem

Given that gold is internationally quoted against the US dollar, any appreciation or depreciation of the greenback will generally cause an inverse reaction in the price of gold. A strong dollar will therefore negatively affect the price of gold.

Since the beginning of the year, instead of a negative correlation, both the US dollar Index which represents the performance of the greenback against a basket of currencies and the XAUUSD pair are moving in tandem.

An alignment which is unusual but occasionally occurs during periods of heightened geopolitical and economic risks.

Source: Bloomberg

Quantitative Easing and Central Bank Gold Hoarding

Quantitative easing is a controversial and unconventional monetary measure used by central banks to pump money into their economies. Recession fears and lack of inflation growth despite a decade of low- interest rate have forced central banks to reconsider QE in 2019.

The ECB has resumed the QE process while the Fed is providing liquidity in the repo markets. While the Fed denies that the interventions are not technically a new phase of QE, such liquidity interventions in the markets instilled fears of a struggling global economy.

As a result, QE is triggering a rally in gold.

The Favourite Mighty Dollar

At the same time, the US dollar is being favoured in the currencies market as it retains a positive interest rate differential with many countries. Overall, investors are looking for the next best alternative. The US economy is not shielded from the global headwinds, but are perceived as performing better in comparison to other major countries.

Is Gold a Better Safe-Haven?

As major economies engage in easing monetary policies, central banks are also piling up on gold. Emerging markets like China and Russia have also increased their gold reserves over concerns on currencies like the US dollar and Euro. Why? To diversify away from the US dollar?

A stock rally and a stronger dollar do not seem to have tamed the rise of gold. The stock rally is being driven by the QE process, easing trade tensions and receding recession fears, while the US dollar is being favoured over its peers.

However, we note that a partial trade deal and a global economy poised for a mini-recovery could limit the potential upside of the US dollar. The “by-default” strengthening of the US dollar could limit the effectiveness of the actions enacted by the Fed to shelter its economy from global headwinds. Also, the global growth narrative is dependent on China’s commitment to Phase One. Both are moving together, but the magnitude is different.

The current sentiment is positive yet fragile due to the uncertainties, which is creating a favourable environment for the precious metal.

Deepta Bolaky, Market Analyst at GO Markets.

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Chapter 6 “Expanding Trade.”

The Story?

But if there a story to be told, its the Phase One trade deal brings with it several issues for global trade. First, existing tariffs on the majority of Chinese goods remain in place. More importantly, if the overly ambitious purchase targets are reached, it suggests other countries will lose out as Chinese demand for their products rotates towards the US.

Still, the questions around the US tech in the supply chain remains unanswered. So, can China realistically hit these targets, especially when US firms are more motivated to produce abroad while China is trying to wean itself off a dependence on US technologies? Or does it even matter?? But it’s all here in black and white The Trade Agreement  chapter 6 is worth a read.  

But Phase one is not BAD  for risk and should boost global growth, plus the Feds will add all the money in the world to keep risk sentiment afloat, and when the ship lists, remember its an election year when US policy always turns positive. So onwards and upwards!!

China Credit

China December aggregate financing CNY2,100.0 bn vs. CNY1,650.0 bn consensus. December new yuan loans CNY1,140.0 bn vs. CNY1,200.0 bn consensus. December M2 money supply +8.7% y/y vs. +8.3% consensus. No noticeable impact on the forward market so far, although rates could nudge a little bit higher.

Asia currency markets

Fading short-term trade-war concerns and evaporating geopolitical risks continue to bolster global equity and credit markets. However, FX markets are more cautious; the rally in Asian currencies took a breather today.

The Chinese Yuan 

There was a test lower for USDCNH on the open, but no follow-through.

As we anticipated on this morning note, some clients are taking profit on their USD/EM downside positions, mainly in USDCNH and USDKRW, on the signing of the trade deal. I also think the proximity to LNY (I know it’s a week away) is causing traders to pare back risk as we know RMB liquidity will be sparse. With bullish targets reached, it’s unlikely we will see any significant move lower for no other reason than P2 discussion are unlikely to start until the LNY has passed.

My clients were asking me why I closed out of CNH so early, partly because I think we’ve hit a temporary floor on USDNCH, but primarily I don’t want to end up paying through the nose on a one-week funding squeeze carry. It could ease, but then again, it might not.

Plus, I’m weighing the odds of going dollar strategically long for only the 2nd time vs. the CNH since October 11. I think there is more risk tail risk than meets the eye, but no rush to trade given EM Asia vols continue moving lower across the board with the selloff accelerating in the last two days. One-month USDCNH is now at 3.9 from 4.6 at Wednesday’s open, 1m USDKRW at 6.0 from 6.6

The Korean Won

USDKRW is trading bid, with chatter on the street of corporate buying going through at the onshore fix market in the morning

The Indonesian Rupiah

Indonesian President Jokowi giveth and taketh after USDIDR gapped down to new lows as local bonds rally. President Jokowi hit the IDR rally pause button, saying a quick rupiah appreciation may hurt exports, so they must be cautious of rapid currency gains. Which immediately raised the yellow intervention flags and one-month USDIDR trades to 13700 from 13650 on this.

G10 Currency Markets

There has been a ton of USD selling across the board in the past 24 hours, but the market reaction has been “Meh.”

The Swiss Franc

Yesterday was the first day this year massive USD selling against EUR and CHF went through. The Euro flow is entirely uninteresting, given the tight follow-through ranges. But the fact there is any CHF buying at these lofty levels is the surprise indicating a considerable break down in the correlation with risk asset, which is both odd and bewitching. After all, positioning does seem to be the wrong way, but the resilience is unlikely to be offset by the SNB after the US Treasury report.  

British Pound 

Weaker UK inflation data yesterday has helped nudge market expectations of a BoE rate cut this month to above 65%. However, the UK PMIs on January 24 will remain important ahead of the MPC meeting on January 30. But I continue skeptical about building shorts as if we get a UK rate cut, it would not be the start of a cycle, but instead, a one-and-done insurance move before Mark Carney clocks out.

Despite the dovish BoE retort and weak data, policy transmission to FX markets has been poor lately. But the market could be getting that sense of déjà vu all over again that the opportunity of capital flows drifting back to the UK in 2020 is too big to ignore.

UBS Strategist Lefteris Farmakis suggests Governor Carney, rubberstamps a return to the ‘old normal’ for sterling, where the influence of economic data on monetary policy is its primary driver, and there you have it apparently  

Gold markets

The Stone Roses “Fools Gold” long hedge unwind trade is trying to unfold as gold is down around $5.00 buck from entry, although nothing to get excited about until the market clears the chunky stack of bids at $1550. So far, the 50 and 200 EMA have given way, but the bids are reasonably impressive down here.

Although we saw large dollar selling yesterday, there was a limited reaction, and at the heart of the trade deal, in my view lies a mildly positive dollar outlook on the margins over the short term. And I think this will be slightly negative for gold, but ultimately for gold, it’s where yields go and how the economic data evolves.

Time for the Stone Roses Trade, long gold hedge unwind “Fools Gold”?

Not all signals are aligned as risk sentiment endures, and while the long-term outlook for gold remains constructive, still, I’m struggling with the long gold strategy at the current price levels (1557-1558). In my view, the approach remains completely ill-defined at the moment, especially with S &P 500 making record highs. Until the yield on 10-year Inflation-indexed Treasuries starts to flash buying signals, bid on a deep dips remains a preferred strategy.

CTA’s are maxed long gold in their gold strategies, ETF positioning is stretched as is the IMM and given the Big gold trading banks’ ability to ramp up a gold paper and free up margins, the market could be ripe for a reversal if US bond yields don’t move lower quickly. It wouldn’t be the first time we’ve seen this set up in the last 4-6 weeks.

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Swiss Franc is Showing, How it Suppose to be Done

We will start with a small update about the USDCHF, which we were talking about few days ago. Back then, we pointed at the flag pattern and the price bouncing from the crucial resistances. We were bearish. USDCHF did not disappoint us and easily broke the lower line of the flag aiming south. Yesterday’s breakout triggers us a legitimate sell signal.

Next one is the AUDCHF, which also was on our radar in one of our previous analysis. Here, there was no surprise as well. The price tested crucial resistances and after drawing a flag, went lower. The sentiment is negative and the AUDCHF is aiming the lows from the August 2019.

Last one is the EURCHF, where we have a similar setup, so a breakout of the lower line of the flag and a sharp drop. We are also mentioning this instrument to show You the power of the technical analysis. The price patterns in particular. The whole drop started with the head and shoulders pattern and the breakout of its neckline. Then, we had a rectangle and the breakout of its lower line. Then a flag mentioned above. Real beauty and I wish You to find more handsome setups like that in the future!

COT: Accelerated Dollar Selling Into 2020

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

For the full Forex Report and Financials Report.

Five weeks of selling has driven the speculative dollar long against ten IMM currency futures and the Dollar Index down to just $5.6 billion, the lowest bets on a stronger dollar in 18 months. The first week of trading was particularly brutal with the dollar being sold against all the major currencies.

The carry supported MXN reached a nine-month high last week and is now challenging the dollar as the most popular long. The GBP long meanwhile reached 16.5k lots, the most bullish since May 2018 while EUR net shorts were trimmed to the least since November.

Leveraged fund positions in bonds, stocks and VIX
What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Correction On The USD Comes To An End

First example is the USDCHF, where the price reversed to test the long-term up trendline as a newest resistance, together with the horizontal line of 0.973. On Friday, USDCHF created a shooting star on the daily chart, which can be an invitation to go south. Currently, the price is creating a flag and the sell signal, will be triggered, when the price will break its lower line.

Similar setup can be found on the USDCAD, where we also had a pullback testing recent supports as closest resistances. The small difference is that here, the price created a shooting star on Thursday, not Friday. Currently, we are below three major resistances and as long as it stays this way, we do have a sell signal.

Those two setups are rather negative for the USD. Now, time for a one, which seems friendly for the American Dollar – EURUSD. Here, the price created a wedge in a downtrend and is currently close to its lower line. It seems that we also had a false breakout above the 1,12 and the major down trendline. Those factors are promoting a further decline, so in consequence – the strengthening of the USD.

This article is written by Tomasz Wisniewski, Director of Research and Education at Axiory

USD/CHF 0.9754 is Interim Resistance

The pair is in a bearish trend. Rejections from the W H3 0.9754 should move the USD/CHF towards 0.9700. A move below and the target will be 0.9674. 0.9754-0.9770 is a strong resistance area. Only if the price moves above M H3 – 0.9770 we should see a potential for uptrend continuation and potential trend change. Below W H3 zone, the price is bearish.

The Analysis has been done with the CAMMACD.Core and Sit Systems

The Prospects of USD/CAD Rebound Continuation

Quoting our last commentary on this currency pair:

We noticed another move to the upside, which not only invalidated yesterday’s drop below the green line, but also the earlier breakdown below the lower border of the declining red trend channel. Both of these invalidations are bullish signs.

Additionally, the current position of the daily indicators suggests that further improvement is just around the corner.

The situation developed in line with the above scenario and USD/CAD managed to break above the upper border of the blue consolidation during yesterday’s session. Earlier today, the pair extended gains, making our long positions even more profitable.

As the buy signals continue to support the buyers, this observation of yesterday keeps being still valid:

Should this be the case and USD/CAD extends gains from here, the initial upside target will be the previously broken black line – that is the neck line of the head and shoulders formation.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Forex Trading Alert – this analysis’ full version. There, we discuss also the current situation in EUR/USD and USD/CHF. The full Alert includes more details about our current positions and levels to watch before deciding to open any new ones or where to close existing ones. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *
All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Three Major Breakouts Giving Long-Term Sell Signals

Today, we have three great setups, which are quite similar to each other. Quite interestingly, as their correlation is usually not the highest.

Let’s start with the first one – USDCHF, where at the end of the year, the price broke two crucial long-term supports. The first one was the up trendline connecting higher lows since the beginning of 2018 and the second one was the horizontal support around the 0.971 – probably the most important price of the 2019. Breakout of those two, brought us a sell signal and the test of those two as a closest resistance brought us a confirmation. As long, as we stay below the orange line, the sentiment is negative.

As we said before, similar setup can be found on the other instrument – USDCAD. Here, on December, the price broke the long-term up trendline, connecting higher lows since 2017 and other support, almost horizontal one, connecting lowest prices in 2019. Breakout of those two is a negative sign and promotes a further drop. Here, we do have an additional fundamental background coming from the higher prices of Oil and Gold with the CAD being a commodity currency.

Last one something more exotic but also very interesting. EURPLN broke from the long-term symmetric triangle pattern after breaking the dynamic support connecting higher lows since 2015. In addition to that, EURPLN broke the horizontal support around 4.24. With all that, it seems that the polish currency will have a positive 2020.

This article is written by Tomasz Wisniewski, Director of Research and Education at Axiory

Swiss Franc – Is There Any Stopping It?

Earlier today, USD/CHF broke below the green support zone and the 61.8% Fibonacci retracement, triggering further deterioration and a breakdown below the recent lows.

This move opens the way to the next support area based on the 76.4% and 78.6% Fibonacci retracements, as the bears have the initiative.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Forex Trading Alert – this analysis’ full version. There, we discuss also the current situation in EUR/USD and USD/JPY. The full Alert includes more details about our current positions and levels to watch before deciding to open any new ones or where to close existing ones. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *
All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Swiss Franc Is Going from Strength to Strength, Seemingly Unstoppable

With today’s candle being a bearish one, it seems one question too many. But let’s take a thorough look at the situation for what it is.

USD/CHF moved lower once again earlier today, which brought about a breakdown below the lower border of the blue consolidation.

While this is a bearish development, the day is far from over, and the green support zone combined with the 61.8% Fibonacci retracement continues to keep declines in check.

Therefore, it’s reasonable to expect a rebound from this area as long as there’s no daily close below the mentioned supports. This is especially the case when we factor in the currently oversold and ripe-for-recovery position of the daily indicators.

Connecting the dots, should we see reliable signs of a potential reversal, we’ll consider opening long positions.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Forex Trading Alert – this analysis’ full version. There, we discuss also the current situation in EUR/USD and AUD/USD. The full Alert includes more details about our current positions and levels to watch before deciding to open any new ones or where to close existing ones. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!
Thank you.

Nadia Simmons
Forex & Oil Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Dollar Long Cut after Specs Cut Shorts in EUR, JPY and GBP

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Speculators sold dollars for the first time in five weeks with the change being driven by short covering in EUR, CHF, JPY and not least GBP ahead of the UK election. Against ten IMM currency futures and dollar Index the gross dollar long was cut by $1.7bn to $20.5 bn.
Ahead of the post-election surge to an 18-month high, the GBP net-short was cut by 7,411 lots to 22,639, the least bearish since May.
Leveraged fund positions in bonds, stocks and VIX
 

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Start trading now

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire