US Dollar Index Spikes Higher as Major Currencies Give Back Weekly Gains

The U.S. Dollar closed higher last week with all of its gains coming on Friday. The headlines said the rally was fueled by month-end profit-taking, but Treasury yields edged higher for the week and most of the U.S. economic reports beat the forecasts so there may be more to the move than end-of-the-month position-squaring.

The Fed was dovish as expected but this wasn’t news since Fed Chairman Powell and his policymaking colleagues have been telegraphing this for months. Nonetheless, the headliner writers blamed central bank policy for the weakness ahead of Friday.

Last week, the June U.S. Dollar Index settled at 91.270, up 0.431 or +0.47%.

Dollar Index Component Breakdown

Breaking down the week into the Dollar Index’s main components the Euro lost 0.63%, the British Pound fell 0.51% and the Japanese Yen closed 1.35% lower. The Canadian Dollar rose 1.46% and the Swiss Franc was up 0.07%.

The Australian and New Zealand Dollars were down 0.49% and 0.47% for the week, respectively. However, the commodity-linked currencies aren’t a component of the dollar index.

The Euro fell sharply on Friday, erasing all of its weekly gains just one day after reaching its highest level since February 26.

Reuters reported on Friday that the Euro Zone economy dipped into a second technical recession after a smaller than expected contraction in the first quarter, but is now firmly set for a recovery as pandemic curbs are lifted amid accelerating vaccination campaigns, economists said.

The British Pound also wiped out its weekly gains on Friday as investors dumped the Sterling ahead of next week’s Bank of England policy meeting. Few analysts expect major changes to the Bank of England’s policy settings next Thursday, although some see the central bank slowing its bond-buying.

The Japanese Yen was weak against the U.S. Dollar all week as rising Treasury yields helped widen the spread over Japanese Government bond yields, making the U.S. Dollar a more attractive asset.

The Canadian Dollar rose against the greenback in a move that was sparked on Wednesday as investors cheered domestic retail sales data and the Federal Reserve stuck to its dovish stance, trailing the Bank of Canada on moves to reduce emergency support for the economy.

The Fed held interest rates and its monthly bond-buying program steady, nodding to the U.S. economy’s growing strength but giving no sign it was ready to reduce its support for the recovery.

In contrast, the Bank of Canada signaled the prior week it could start hiking rates from their record lows in late 2022 and cut the pace of its bond purchases.

Essentially, Canadian Government bond yields rose faster than U.S. Government bond yields, making the Canadian Dollar a more attractive asset.

For a look at all of today’s economic events, check out our economic calendar.

Gold Climbs Higher After Extremely Handsome Price Action Setup

Gold is marching higher after one of the most handsome price action setups ever.

Silver also joins the bullish party and denies the Head and Shoulders pattern.

The EURUSD climbed higher after the Inverted Head and Shoulders bounced from the 38,2% Fibonacci.

The USDCHF is in a correction mode aiming for the crucial support of 0.93.

The EURPLN dropped lower after a false bullish breakout from the ascending triangle.

The USDCAD is very close to ending a long-term bearish trend.

The GBPCHF is seeing a very sweet drop, which has a great chance to be one of the best trades in terms of risk to reward ratio.

The NZDCHF fell after the price ended a flag pattern with a head and shoulders pattern. A test of the up trendline seems imminent.

For a look at all of today’s economic events, check out our economic calendar.

Weaker Dollar helps Gold to Stay Above Crucial Support

Gold is testing the ultimate long-term support again. This time, we do have a chance for a double bottom formation.

Silver is in a slightly worse situation as we are still quite far from crucial supports and a lot can happen in the meantime.

Indices are climbing higher like there is no tomorrow.

The EURUSD with a bounce from the 38,2% Fibonacci. That can be the end of USD strength.

THE USDCHF is possibly starting a bearish correction as the price is currently drawing the shooting star on a daily chart.

The GBPUSD is reversing, which is denying a quite sweet sell signal from yesterday.

The NZDCAD breaks the lower line of the flag and aims lower.

The EURPLN stays above the upper line of the triangle proving that this pattern is super effective.

For a look at all of today’s economic events, check out our economic calendar.

This Is What It Looks Like When The Dollar Goes From Bearish To Bullish

In December of 2016, the dollar index rose to a high just above 103. Of course, the dollar index is literally a measurement of the United States dollar relative to six other currencies, which include the euro (57.6%), the Japanese yen (13.6%), the British pound (11.9%), the Canadian dollar (9.1%), the Swedish Krona (4.2%) and the Swiss franc (3.6%).

chart 1 dollar daily line chart

As you can see in chart 1, a line chart of the dollar index from December 2016 to current pricing, after reaching a high in December of 103, the dollar index fell to just above 88 in January, mid-February, and March 2018. The three lines represented in red magenta and green represent simple moving averages with the 50-day moving average, as the short-term green line, the 100-day moving average drawn in magenta, and the long-term 200-day moving average in red. From its fall from 103 to 88, you can see these three moving averages, for the most part, in full bearish alignment. This occurs when the order of the averages puts the 200-day as the highest value, followed by the 100-day in the middle and finally the 50-DMA as the lowest value.

After hitting the lows in March and April 2018, the dollar index began a slow and methodical climb to a higher value, and you can see the relative points between April and July 2018 when the moving average has moved into full bullish alignment. The exact opposite of bearish alignment, you have the 200-day moving average on the bottom, followed by the 100-day moving average in the middle, and finally the 50-day moving average on top. Although there are points in which the 50-day moving average crosses below and then back above the 100-day moving average, for the most part, they stayed in bullish alignment up until May 2020. By July of last year, the three moving averages moved back into full bearish alignment and maintained their respective positions up until this last week.

chart 2 dollar index current

Chart 2 is an enlargement showing the most current data. At the beginning of this year, the dollar index had still been spiraling lower until reaching a low of 89.42 in January and then moving higher to its current pricing of 92.73. That means that the dollar index gained over 3% in value in the first quarter of this year. More so, for the first time since June 2020, it appears as though the shortest-term moving average (50-day) is about to cross above the 100-day moving average. On a technical basis, this would be the first strong signal that the prevalent bearish market sentiment that has existed since March 2020 has subsided and could be signaling a shift in market sentiment from bearish to bullish.

chart 3a gold and the dollar

The obvious reason this is so important to market participants involved in gold is that the precious yellow metal is paired against the dollar, which means that there are two major factors changing the daily price of gold. The first, of course, is market sentiment, whether market participants are actively buying or selling. The second is dollar weakness or strength. Chart 3 is a line chart with gold (gold) overlaid against the U.S. dollar (green). It is clearly visible that since the beginning of 2021, we have seen dollar strength and concurrently weakness in gold pricing.

Whether or not this trend will remain will be dependent on the timeline for the United States to have an economic recovery taking it from the recession caused by the pandemic in March of last year to the strong economy that occurred prior to the pandemic.

The answer to the question posed above not as easy to answer as one might think. While it is clear that we have made incredible headway from the worst of the recession, many unknowns still exist as to how long it will take for the United States to make a full economic recovery.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health,

Gary S. Wagner

Inverse Head and Shoulders Everywhere Saving the Bulls from Losses

Silver defends crucial horizontal support with a hammer and possibly, inverse head and shoulders pattern.

Brent Oil also tries to create the iH&S formation. Buy signal after the breakout of the neckline.

Dow with V-shape reversal and the bullish breakout of the upper line of the flag. That is bullish.

DAX with a very similar situation. All-time highs are very close.

The USDCHF continues the surge after a beautiful iH&S pattern.

The GBPUSD is testing crucial resistance. A bounce would bring us a very strong sell signal.

The EURPLN is breaking a very strong horizontal resistance. That can be very bullish.

The NZDCHF bounces off a crucial horizontal support with an Inverse Head and Shoulders pattern. Price action at its finest!

For a look at all of today’s economic events, check out our economic calendar.

USD Flexes Muscles Again

Gold although after a bullish bounce, is still struggling to increase the bullish momentum.

Silver is aiming to test the ultimate support at 24,8.

Brent Oil is in a possible false bearish breakout.

The DOW is moving higher after a breakout of the upper line of the wedge pattern.

The DAX is still above the major support level of 14550.

The EURUSD fell after a definite breakout at the 1.1960 resistance level.

The USDCHF is aiming higher after the price broke the 28,2% Fibonacci.

The GBPUSD fell after major supports surrendered to the bearish invasion.

The EURPLN is in a ascending triangle pattern which is bad news for the PLN.

For a look at all of today’s economic events, check out our economic calendar.

USDCHF Analysis: Swiss Franc Weakens Ahead of FOMC

The US building permits dropped significantly in February, 1,682M building permits issued in February which is 204M lower than in January. The US 10Y bond yield nears the 2018 lows, and notwithstanding to that fact the US Dollar Index continues to gain nearing 92 today.

Source: TradingView

The year has started unfortunate for the Swiss Franc as the CHF lost 6.33% to GBP, 2.15 to Euro and 5% to Australian Dollar.

The negative rates kept by the SNB, causing the inflation to remain negative, for the second month in a row the inflation in Switzerland remains -0.5%. Though the deflation has significantly improved, according to the data the state is still in deflation mode for a consecutive year. Incomes of the Swiss National Bank have dropped significantly in 2020, resulting in a total loss of 27,982.1M CHF.

Source: Tradingeconomics

USD/CHF is in a correction mode in a whole week since March 10, after a trend reversal early this year. The breakout from the descending ending diagonal supported the uptrend of the US Dollar against the Swiss Franc.

USD/CHF quote on Overbit

4-Hour chart of the pair suggests that the uptrend continuation of the pair is possible after a confirmed breakout from the triangle.

USD/CHF quote on Overbit

By the time of writing this article, USD/CHF on Overbit is traded at $0.92800 and is testing the upper edge of a triangle pattern. The breakout from this triangle will trigger a jump towards $0.93760 and $0.94750 above the local high. The uptrend is supported by RSI and MACD indicators as well as the EMA50. The volatility during the FOMC meetings will create a bumpy road for the price’s ongoing trend-continuation, hence it is highly recommended to keep eye on key levels, supports and resistances, one important resistance lies at $0.93140.

US Dollar Gains Strength

Gold still holds strong but chances for a second test of 38,2% are increasing.

Silver inside of the symmetric triangle pattern, getting ready for a breakout.

Nasdaq dangerously comes back below the neckline of the giant inverse head and shoulders.

DAX inside of the ascending triangle pattern. Bullish breakout slightly more possible.

EURUSD drops after bounce of the 1.1915.

AUDUSD breaks the lower line of the symmetric triangle.

NZDUSD with a very similar situation as the Australian peer.

USDCHF breaks the upper line of the flag, looking bullish.

NZDCAD with an ultimate bearish setup. Few negative factors at once look very pessimistic.

For a look at all of today’s economic events, check out our economic calendar.

Weekly Forex Commentary March 14, 2021

EUR/USD ranges this week severely diminish due to problems within the EUR universe. EUR/JPY remains light years overbought while EUR/NZD and EUR/CAD maintain oversold conditions. EUR/CAD broke its 5 year average at 1.4955 and trades ranges from 1.4955 to 1.4547 then 1.4427. EUR/GBP is oversold however it trades between 0.8740 to 0.8414 to the 5 and 10 year average. EUR/USD cross pairs will determine EUR fate this week to direction. 

GBP/NZD from this week’s close at 1.9374  sits on supports at 1.9330 and 1.9246. Last week vitals from 1.9318 to 1.9188 and the week prior 1.9318 to 1.9176. GBP/AUD from its close at 1.7927 contains resistance at 1.7934 then 1.8134 and last week 1.8130 to 1.7905 then 1.7885 to 1.8130. Both are problem pairs entering into the new week.

Week 7 to massively overbought JPY cross pairs. For the month, NZD/JPY rose 100 pips, barely 200 for AUD/JPY and EUR/JPY, 400 for GBP/JPY and a rare day for 400 pips to CAD/JPY. CAD/JPY beat USD/CAD by 100 pips as USD/CAD traded 300 pips. traditionally, USD/CAD always trades wider ranges than CAD/JPY as CAD/JPY is the follow pair to USD/CAD.

USD/CHF and USD/JPY begin the week deeply overbought while USD/CAD is severely oversold. The strategy this week is long USD/CAD, short CAD/JPY and refrain from trading laggard currencies, USD/CHF and USD/JPY. For problem pair USD/JPY lower must break the 5 year average at 108.98 then 106.43. Above at 109.00’s and 110 is maximum to USD/JPY averages dating to 1999. 

While GBP/JPY and GBP/CHF are overbought, GBP/CAD matches EUR/CAD to oversold and GBP/NZD and GBP/AUD as problem pairs. GBP/USD like EUR/USD is hostage to its cross pairs for direction. 

AUD/CAD and NZD/CAD both broke below vital points at 0.9737 and 0.9073. With NZD/CAD’s break lower, NZD/USD’s close at 0.7173 sits 53 pips above its vital break at 0.7120. Overbought NZD/JPY and NZD/CHF will assist NZD/USD’s eventual break at 0.7120. Then AUD, GBP and EUR slide further. 

AUD/USD big break lower is located at 0.7641. AUD achieves this challenge by breaks lower at 0.7716 and 0.7679. 

Gold remain inside 1815 to 1642. DXY 91.43 Vs 92.78 and 89.95 below. The 2 year yield broke above reported 0.1511 to trade 2 points higher to 0.1711. The 10 year yield at its 1.625 close, trades inside its wide ranges from 1.3305 to 1.8448. 

Respectfully readers, I work extraordinarily hard consistently over 17 years to write the most accurate levels, entries and targets, to bring the most accurate data and market concepts. Don’t believe my words as all is documented here.

Gold Finds the Ultimate Support

 

Gold meets the ultimate horizontal support and bounces from it with a confidence.

Silver comes back above the uptrend line.

Nasdaq denies the head and shoulders pattern.

DAX trades confident around the all-time highs.

The EURUSD meets a very promising resistance but the bullish momentum looks strong.

The AUDUSD aims higher after the inverse head and shoulders pattern.

The USDCHF drops after the price creates a head and shoulders pattern on the 38,2% Fibonacci.

The CHFJPY enjoys the ride north after the false bearish breakout.

The USDMXN tests very promising support but so far, there is no sign of any bigger demand.

For a look at all of today’s economic events, check out our economic calendar.

Markets are not Yet Convinced that Yesterday’s Move Signaled a Trend Change

China’s stocks tumbled yesterday, despite reports of official assistance, were mixed with the Shanghai Composite posting small gain and Shenzhen a small loss. South Korea and Australia’s benchmarks slipped lower. Europe’s Dow Jones Stoxx 600 is extending its gains for a third session, while US futures indices are narrowly mixed. The US 10-year yield is a few basis points higher at 1.55%, and most European benchmark yields are slightly firmer. Australian and New Zealand bonds rallied, and yields fell around seven basis points. The US dollar is mostly a little higher against the majors and mixed against the emerging market currencies.

The yen and Swiss franc are the laggards, nursing around a 0.2% loss near midday in Europe. The JP Morgan Emerging Market Currency Index rose by 0.7% yesterday, the most in two months, and has edged a little higher so far today. After rallying almost 2% yesterday, gold is consolidating in a narrow range, mostly between $1710 and $1720. April WTI initially slipped to a four-day low near $63.15 and recovered, rising to $64.35 in the European morning before the buying appears to dry-up.

Asia Pacific

China reported February inflation gauges and lending figures. Consumer price inflation remains below zero. The CPI rose to -0.2% from -0.3% and on a year-over-year basis. The 0.6% rise on the most is the least in three months. Consumer goods prices are off by 0.3% year-over-year, showing continued deterioration. However, prices of consumer services fell 0.1% after a 0.7% year-over-year plunge in January.

The decline in pork prices accelerated. The fading base effect will likely allow CPI to turn positive shortly. Producers prices jumped 1.7% year-over-year after a 0.3% rise in January. Rising commodity prices and the favorable base effect were the key drivers.

China’s lending figures slowed from the hectic pace in January but were stronger than expected. New yuan loans rose by CNY1.36 trillion after a CNY3.58 trillion surge in January when new lending quotas were available. Aggregate financing, which adds the shadow banking activity to traditional lending, rose by CNY1.71 trillion, nearly twice what was expected, but still a dramatic slowdown from the CNY5.17 trillion.

RBA Governor Lowe pushed against market expectations and appeared successful as the yield on the three-year note (targeted at 10 bp) slipped for the second day. It is the first back-to-back yield decline in more than a month, and the three-year benchmark yield eased below the target for the first time this year. Lowe warned the market was getting ahead of itself in pricing in a rate hike. He continued to signal that rates were unlikely to rise until at least 2024.

Lowe dismissed the increase in inflation expectations priced in as not exceptionally high or above the central bank’s target. He reiterated the evolution of its forward guidance, which emphasizes actual inflation over inflation forecasts, and continued to pin the outlook on wage growth. Wage growth, he says, needs to be above 3% or more than double the current record low of 1.4%.

The dollar is consolidating within yesterday’s range against the Japanese yen and has been mostly confined to a JPY108.50-JPY18.90 range. Yesterday’s high was almost JPY109.25. The greenback had finished the North American session near its lows against the yen but was bought in early Asia. With firm US yields, it would not be surprising to see the dollar probe higher in the North American morning./European afternoon. The Australian dollar is moving sideways in the roughly one-cent range established at the end of last week (~$0.7620-$0.7730).

The upper end was rejected in North America yesterday. After pulling back in early Asia Pacific turnover, it recovered, only to find more sellers in Europe above $0.7715. After falling by about 0.3% against the Chinese yuan yesterday, the dollar edged slightly higher today. The greenback has risen in four of the past five sessions and remained above CNY6.50 today. The PBOC set the dollar’s reference rate at CNY6.5106, which was a bit more than usual away from the Bloomberg bank survey that found a median of CNY6.5127.

Europe

French industrial output surged in January. The 3.3% jumped compared contrasted with a median forecast in the Bloomberg survey for a 0.5% gain. It was driven by coke and refinery and mining sector. Auto output and transportation material fell. France is the last of the big four EMU economies to report. Recall Germany’s industrial output unexpectedly fell by 2.5%, but the December gain was revised to 1.9% from zero.

Italy’s 1.0% gain was a surprise in the opposite direction, and the December series was revised to show a 0.2% gain (initially a 0.2% decline). Spain’s was a little weaker than expected at -0.7%, and adding insult to injury, December’s 1.1% gain was shaved to 0.8%. The aggregate figure for the eurozone is set for release on Friday.

The ECB begins its two-day meeting, and tomorrow’s announcement will be followed by the press conference. The ECB will be updating its forecasts, and near-term growth projections will likely be shaved while this year’s inflation forecast may edge higher.

The focus is not on exchange rates but yields. Officials seem to have signaled a desire to look past the near-term volatility. There is much expectation that it could increase its bond purchases, but to commit it would seem to remove an important element of flexibility. The Fed commits to buying $120 bln of long-term assets a month. The ECB does not commit to any size, and it will likely keep it this way.

The euro approached its 200-day moving average yesterday (~$1.1830) and rebounded smartly to about $1.1915. Although it finished the North American session near its highs, there has been no follow-through buying today, and the euro had found new sellers when it poked above $1.1900 in early European turnover. Initial support may be seen in the $1.1870-$1.1880 area.

The market appears to see asymmetrical risk from the ECB, and short-term participants may be reluctant to be long euros ahead of Lagarde’s press conference tomorrow. Sterling is also trading within yesterday’s range and is a little changed a little below $1.3900.

Initial support is found around $1.3880 and then $1.3845. The market seems content to consolidate and await fresh directional cues ahead of tomorrow’s data dump that includes January’s monthly GDP figures, where a large contraction is expected.

America

There are two highlights for the US markets today aside from the formality of the House of Representatives approving the new stimulus package. First, the US reports February CPI. It is the last before the base effect surge that will extend through most of the spring. Last month, food and energy prices rose, which will lift the headline pace to around 1.7% from 1.4%.

The core rate was flat in January, and a 0.2% rise in February may keep the year-over-year rate steady around 1.4%. Barring a surprise, the market impact may be minimal, pending the second important event’s outcome. The US Treasury will sell $38 bln 10-year notes. Yesterday’s 3-year note sales was well received, with the highest bid-cover (2.69x) since mid-2018. However, the real test is with the longer-dated paper, including tomorrow’s $24 bln 30-year bonds sale.

Expectations for today’s Bank of Canada meeting are low. No policy change is expected, and the rhetoric has been rehearsed. The central bank is committed to maintaining the monetary stimulus for some time and well-beyond the immediate economic pick-up. Governor Macklem sees a role for monetary policy in helping to facilitate structural economic changes, like digitalization, which seem to be accelerated by the pandemic. The large fiscal stimulus in the US, which the OECD estimates will add three percentage points to its growth, will have a spill-over effect and likely help Canada as well.

That is to say that the US stimulus should make BoC officials more confident in the economic outlook. The Bank of Canada will provide a broader assessment in April, but some expect a hint that more tapering of its bond-buying is likely in the coming months. Canada’s 10-year bond yield has more doubled since the US election and vaccine announcement to almost 1.55% before pulling back. Yet, given that underlying core inflation was at 2% in January (February’s figures will be reported on March 17), rates are not high. The 10-year yield finished 2019 closer to 1.70%.

As North American markets are set to re-open, the US dollar is trading in the middle in the session’s range against the Canadian dollar (~CAD1.2630-CAD1.2685). It is within yesterday’s range. Indeed, the greenback has hardly traded outside of the range set during the last session of February (~CAD1.2585-CAD1.2750). The intraday technical readings may favor the greenback’s upside. The Mexican peso is holding yesterday’s gains but has been unable to extend them. The US dollar fell from above MXN21.50 yesterday to flirt with the 200-day moving average around MXN21.1560. A break of yesterday’s lows signals a test on the MXN21.00 area. Initial resistance may be near MXN21.30.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.

GBP/JPY Vs GBP/USD and USD/JPY – March 6th, 2021

GBP/USD last week fell 236 pips from 1.4015 to 1.3776 while overbought GBP/JPY rose 257 pips from 148.14 to 150.71.

Known since the 1930’s, the Japanese pegged GBP/JPY to UK Gold for not only economic viability but the first incursion to the western world of finance. The standard to hold GBP/JPY to the UK held throughout Bretton Woods. Upon the 1972 free float, GBP/JPY became attached permanently with high +90% correlations to GBP/USD.

All JPY cross pairs followed with high and positive correlations as AUD/USD and AUD/JPY, NZD/USD and NZD/JPY, EUR/USD and EUR/JPY while USD/CAD and CAD/JPY became polar opposites as both permanently correlate negatively. USD/CHF and CHF/JPY traditionally also hold opposite correlations.

The Japanese offered not only a double trade but GBP/JPY and GBP/USD as the same exact currency pairs. The same principle holds true for EUR/JPY and EUR/USD, AUD/USD and AUD/JPY and NZD/USD and NZD/JPY. The double trade is permanent for USD/CAD and CAD/JPY.

Why JPY cross pairs remain overbought into week 6 amd not falling with counterpart currencies is the USD/JPY problem to correlations. While GBP/USD correctly correlates to GBP/JPY at +94%, GBP/JPY also not correctly correlates to USD/JPY at +83%. A further problem exists as GBP/USD correlates to USD/JPY at +46 %. All correlations are not only running positive but this situation is the exact same for AUD/JPY, NZD/JPY, EUR/JPY, CAD/JPY and explains why prices remain high and overbought.

Positive correlations are the result of exchange rate prices and relationships to moving averages since correlations are found within the context of averages. USD/JPY trades above vital 105.70,  GBP/USD above 1.3697 and GBP/JPY above 144.80. Correlations are positive because prices trade above respective high / low averages.

Required to assist GBP/JPY to drop is GBP/USD breaks 1.3697 or USD/JPY trades below 105.70. GBP/JPY then decides to fully correlate to USD/JPY or GBP/USD. GBP/JPY in every instant follows GBP/USD as the 91 year correlation and order of currency markets.

Current GBP/JPY trades 1156 pips above GBP/USD and 2506 pips below GBP/CAD. GBP/JPY larger range from GBP/USD becomes 144.08 and 1.5564. GBP/JPY above is located the 14 year average at 155.38 and the 10 year at 148.36.

Prior to the 2016 interest rate changes by the central banks, the market order to currency pair arrangement existed as GBP/USD, GBP/JPY, GBP/CHF then GBP/CAD.

The new order is arranged as GBP/CHF, GBP/USD, GBP/JPY then GBP/CAD and seen as GBP/CHF 1.2855, GBP/USD 1.3820, GBP/JPY 149.86 or 1.4986 then GBP/CAD 1.7292. Much daylight exists for GBP/JPY to trade freely between GBP/USD and GBP/CAD yet 250 pips traded last week from a distance of 1100 and 2500 pips between exchange rates.

Why GBP/CHF and all currency  pairs arranged as Other Currency / CHF dropped from contention as support is due to the uniqueness to the SNB’s interest rate system. Libor is miles from actual interest rates as first comes Saron, Call Money rates and the most vital Debt Register Claims.

JPY cross pairs overall contain downside moves from GBP/JPY at 300 pips and 200 for AUD/JPY and NZD/JPY.

USD/JPY for the week is not only light years overbought but the 5 year average is located at 109.01. A good target is found at 106.65.

GBP/JPY big break lower is located at the 10 year average at 148.38. A break then GBP/JPY trades 146.00’s easily.

GBP/USD this week opens between 1.3768 and 1.3840. Below 1.3768 challenges most vital 1.3697, above 1.3840 then GBP/USD travels much higher.

GBP/CHF and GBP/CAD run good and positive correlations at +93% and +96 % for GBP/CAD. For GBP/NZD and GBP/AUD remain problems as correlations run negative at -43% and -64% for GBP/AUD.

GBP/JPY

Included are GBP/JPY moving averages from 5 day to 253 days. The averages are perfect and derived from the ECB. The first number is the day average followed by trading days then the average.

A 20 day average is actually 15 days, a 50 day average is actually 36 days. Trading day averages to factor perfectly start at the beginning of every year then the numbers increase as days trade. A 50 day average is most stable as it only trades 36 to 50 days.

A 5 day average begins Monday at 2 days, then 3 for Tuesday and Wednesday and 4 for Thursday. A full 5 day average only trades on Fridays.

5 Day     5             149.2391

10 Day  9             149.1325

20 Day  15           148.3808

50 Day  36           145.2691

100 Day               71           142.5398

200 Day               143       139.9417

253 Day               180       139.1231

As GBP/JPY trades lower then the averages drop.

Targets

Targets are not only known miles ahead but targets stack to watch trades unfold.

Current targets: 149.7549, 149.8496, 149.5086, 148.1852, 146.0887, 143.7901, 143.0356.

The ECB and most central banks factor exchange rates to 6 decimal places and 4 for USD/JPY and JPY cross pairs and I follow the ECB exactly.

GBP/USD Day Trade and Currency Markets Next Week

Only on rare trade days is a price path vanquished. Upon a rare break, the market offers free money as a price must tade back to the respected price path.

From 1.3915, GBP was located between 1.3912 to 1.3921 while 1.4017 fell short of 1.4019 and 1.4028. Long targets this week achieved better progress than downside shorts. Why is because of the deep nuance of a currency and any market price. Downside prices to all financial instruments factors vastly different than upside targets and most particularly to day trades. Weekly and long term target trades computes differently from a day trade.

GBP/USD’s drop from Powell at 1.4017 to 1.3882 violated 1.3886 by 4 pips. The day trade held despite ECB’s entry into markets.

GBP/USD this week is characterized as a range trade due to rises from from lower ranges and up target failure to trade fully to exact points. Quite a dangerous situation as the full potential to price paths failed to materialize. Normally this is an early warning to stand clear especially when 7 other currencies exist to trade and also if USD/CAD is off kilter to GBP/USD. Both pairs define overall currency markets as perfect opposites.

No stops or charts are required for day trades as price paths are known in advance and informs specifically to entries and targets. No mysteries exist as central banks are never wrong to freely offered day trades.

EUR/USD broke 1.2050 then 1.2020 and traded 106 pips to 1.1914. EUR/USD is now established as a short only strategy. NZD/USD as bottom currency becomes the defining pair by a break of 0.7138. A break lower brings down the house to non USD pairs, specifically GBP and AUD/USD at current 0.7652. NZD/USD bottom price today is located 0.7136 so crucial for NZD/USD to break 0.7138 later today after ECB or Monday.

DXY not only broke reported 91.43 and traded 60 pips higher to 92.03 but the break higher assist rises to all USD pairs and specifically USD/CAD as the laggard to USD to not cross higher at 1.2775. USD/CHF broke 0.9054 and traded 0.9309 highs while CAD/ZAR crossed above 11.88 to trade currently 12.0632.

USD/JPY broke above 105’s yet USD/JPY is off sync to USD, currently overbought and not worth trade consideration long into the future.

DXY now ranges from 91.43 to 92.78 and next hurdle is located at 94.39 to range 92.78 to 94.39.

The factor to USD/CAD is the result of Canada’s TSX Composite as Correlations are more specifically opposite and closer to USD/CAD’s price far more than WTI. Consider an average daily move for the TSX begins at 90 points and normally trades far more than 90 and much more than the DAX.

Stock markets as risk assets are all not only falling but contain far more downside. The TSX drop will assist USD/CAD higher.

WTI traded 4 points yesterday Vs USD/CAD 118 pips. Wednesday WTI traded 3 points to USD/CAD 67 pips. Long term, USD/CAD may share decent correlations to WTI but short term and to day trades, correlations break down and hover weakly between negative and positive.

GBP/USD Day Trade

GBP/USD is located in a dangerous location below 1.3818. Correct is GBP/USD trades to 1.3831, 1.3852 and break above 1.3888 then comes 1.3949 and 1.3958.

My currency arsenal contains 476 currency pairs and always open to suggestions for a specific currency or currencies to trade.

Emerging Caution Despite Continued Strength

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

The below summary highlights futures positions and changes made by hedge funds across commodities, forex, bonds and stock indices up until last Tuesday, February 23. A week that saw emerging unease about the continued rise in bond yields that culminated last Thursday, two days after data for this report was compiled. Before then, the S&P 500 dropped 1.3% while the technology heavy Nasdaq slumped by 4.2%. The commodity sector managed another rise to a fresh 34-month high while the dollar traded softer before an end of week spike on emerging risk aversity.

Commodities

Ahead of the bond market turmoil last week, hedge funds had turned a bit more cautious on commodities. Despite seeing the Bloomberg Commodity index climb to a fresh 34-month high, the report shows that leveraged funds cut exposure to energy and metals. Overall however, the combined net long across 24 major commodity futures was unchanged at a record 2.7 million lots, representing a nominal value of $144.4 billion. This due to continued demand across the agriculture sector where the combined net long reached a fresh record at 1.3 million lots. The buying was led by sugar, coffee and soybeans on weather worries in Brazil.

Most noticeable change considering the continued rally was in HG copper where speculators, despite seeing the metal rally 9%, cut their exposure by 19% to a 20-week low.

Energy:

Emerging risk aversity despite strong price action was seen across the energy sector where all but one saw small net reductions. The combined crude oil long was reduced by 1.7k lots from a 2-1/2-year high to 736k lots.

Metals:

Speculators reduced bullish copper bets while the price continued to surge higher to reach the highest level since 2011. The 19% reduction in the net-long to a 20-week low was primarily driven by longs being reduced with no sign of fresh short selling. Gold held steady at 83k lots, a 21-month low while both silver and platinum saw reductions.

Agriculture:

The combined long across the six grain and oilseed contracts rose by 10k lots to 796k lots, a seven-week high. Biggest moves in soybeans (+11k), wheat (+6k) and corn (-5k). All the four softs contracts saw strong buying led by sugar by sugar (+21k lots to 219k), Arabica coffee (+14k to 35k, a 22-week high), cocoa (+1k to 16k) and cotton (+4k to 72.4k and highest since August 2018).

Forex

In FX, speculative flows were very modest for a second week as dollar stayed range-bound before its end of week jump as rising bond and stock market volatility helped attract safe-haven and short covering. In the week to February, however, the overall dollar short ten IMM currency futures and the Dollar Index saw a small increase to $31.4 billion with buying of CHF and especially GBP being off-set by EUR and accelerated JPY selling.

Financials

Speculators maintained their Cboe VIX futures short at a 12 month high at 163k lots, just days before jumping on rising yields and lower stocks unease.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • 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

Swiss Franc in Troubles

Gold holds above the 1765 USD/oz.

Silver on it’s way to test crucial horizontal resistance.

Nasdaq traditionally with a V-shape reversal.

DAX bounces of previous bull market highs and aims for the ATH.

The EURUSD pushes higher after the breakout of the neckline and the horizontal resistance.

The USDCHF with a long-term buy signal after major bullish breakout.

The EURCHF surges after price broke the key horizontal resistance.

The EURPLN escapes from the rectangle and aims for new mid-term highs.

For a look at all of today’s economic events, check out our economic calendar.

Commodities Rise as Dollar Falls

Gold bounces off the 1765 USD/oz support.

Silver also goes higher after bouncing off an important dynamic support.

The Nasdaq tests the mid-term up trendline.

The DAX is in a daily hammer, so far…

The EURUSD is a few steps from a major buy signal.

The USDCHF bounces off a dynamic and horizontal support.

The NZDCAD is currently attacking a major horizontal resistance, getting ready for a long-term buy signal.

The USDCAD price is in a inverse head and shoulders pattern for the second time in 5 days.

For a look at all of today’s economic events, check out our economic calendar.

DXY V S&P Feb 14 2021

To respectfully indulge words from the last post for context:

Overall, EUR/USD was the first currency in August 2020 to break above its 5 year average at 1.1300’s then the 10 year average in December 2020 at 1.2100’s. EUR/USD is categorized in the class of a risk asset and non USD currency.

EUR/USD’s early break to its 5 year average set remainder 27 currencies on a course of deep perspective as non USD currency pairs had to not only match EUR/USD’s break to significant averages but the 1000 pip rise in GBP/USD, 700 for AUD/USD and other non USD currency pairs traded weekly from overbought to overbought and a non normal price circumstance. EUR/USD’s break threw normal price markets deeply off course since August 2020.

Non USD currency pairs such as DXY, USD/CAD, USD/CHF and USD/JPY only option since August 2020 was to concur with EUR/USD and non USD rises by trading deeply oversold week to week and to break 5 and 10 year averages.

EUR/USD and non USD currency pairs as risk assets followed risk asset counterparts in stock markets higher to current richter scale overbought levels. The S&P’s at 3900.00’s trade at extreme overbought levels. The DAX achieved all time highs. Stock market longs are virtually impossible until a significant correction occurs.

DXY

DXY for example just broke above its 10 year monthly average at 89.95 and contains a long way to travel to the 5 year average at 95.00’s. A currency pair to trade at a 10 year monthly average is not only a low, low price but extraordinary and highlights the magnitude to the rises and falls since last August.

Next averages above to break are located at 91.43, 92.78 then 94.39 and 94.16. DXY from monthly averages 1 to 7 years faces stiff resistance from 94.00’s to 95.00’s. A break through this brick wall then DXY will travel easily to 97.00’s and 99.00’s.

DXY below 89.95 targets 86.43, 84.32 and 81.83 at extreme oversold.

Targets for DXY above 89.95 are located at 90.86, above 91.43 then 92.15, 92.47 and 92.66. Above 92.78 targets 92.87 and 92.89.

DXY from current ranges from 89.95 to 92.78 trade at its widest ranges. As DXY travels higher then ranges severely compress. The opposite is true for EUR/USD as the higher it trades then ranges open much wider.

Despite a low price and trade below monthly 5 year averages, DXY is mid range to oversold/ overbought.

S&P’s

DXY viewed from the S&P’s informs trade location miles above the 5 year monthly average at 2722.43 and at overbought to extremes. Overbought S&P’s reveals a healthy correction is on the way, DXY higher and EUR/USD as well as non USD currency pairs to follow much lower.

The S&P’s are held by immediate averages at 3257.68, 3119.54 and 2989.17. A correction targets 3598.53, 3416.84 and 3300.20. A 400 point correction to the S&P’s assumes DXY travels 300 ish pips higher and breaks above 92.78 to trade between 92.78 to 94.39.

S&P averages from 3257.68 travels every 100 points to 2200.00’s at the 10 year monthly average. Current S&P’s ranges are fairly suppressed however as S&P’s drop then ranges expand as the downside gains progresses.

GOLD

Gold trades above its 5 year monthly average at 1461.20 and trades misaligned to the S&P’s. Gold and the DXY are the same assets and should trade below 5 year monthly averages while the S&P’s trade above.

Gold’s drop is held by 1815.65 and below targets 1642.17 and 1543.98. Gold is deeply overbought from a medium and long term perspective. Gold is finished above at 1943.62 and short is the only trade available.

Moving forward, long USD and DXY is the best option while short Gold and the S&P’s although Gold lacks any real range capability. Gold viewed from 150 to 200 points is a viable option as it fails to contain any big price moves.

 

Indices Ready to Set New All-Time Highs

Gold bouncing of 38,2% Fibonacci and creating a head and shoulders pattern. That can be negative.

Brent is continuing the buying fiesta.

Nasdaq is ready to set new ATH.

DAX breaks the upper line of the wedge and aims for the new highs.

The EURUSD escapes from the wedge too and also climbs higher.

The AUDUSD escapes from the flag and the tests the broken resistance as a support. Definitely a bullish attitude.

The USDCHF drops below crucial horizontal and dynamic supports. This is not good for the demand.

The NZDCAD still below crucial long-term horizontal resistance. Interesting occasion for short.

The NZDUSD with a very similar setup to AUDUSD but in this case, instead of a flag, we do have a pennant.

For a look at all of today’s economic events, check out our economic calendar.

Gold Disappoints While Oil and Indices Climb Higher and Higher

Gold dropped and is aiming at the 1765 USD/oz level.

Oil, on the other hand, seems to be aiming for the stars.

The DAX is in a bullish engulfing pattern on the weekly chart that looks great for buyers.

The EURUSD has dropped significantly before bouncing. Most likely the price will test the 1.206 resistance level.

The AUDUSD is aiming higher after an inverse head and shoulders pattern.

The USDCHF met a strong horizontal resistance after a nice upswing caused by the iH&S formation.

The NZDCAD is still below the crucial resistance level of 0.923.

The USDCAD in a pennant, waiting for a breakout.

The NZDUSD is in the same situation. The price will potentially see a big move ahead.

The EURGBP has dropped like a rock after the price created a massive head and shoulders pattern.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Index (DX) Futures Technical Analysis – Testing Major Retracement Zone at 90.950 to 91.370

The U.S. Dollar reached a six-week high on Monday on weakness in the Euro, Swiss Franc and Japanese Yen amid views that the United States has an advantage in growing its economy and vaccinating its population against COVID-19.

The Euro was off 0.57% to 1.2069. The Japanese yen weakened, hovering around 105 to the U.S. Dollar, a level not seen since mid-November. Against the Swiss Franc, the U.S. Dollar was up 0.66% to .8967, its weakest level in two months.

On Monday, March U.S. Dollar Index futures settled at 90.975, up 0.406 or +0.45%.

The moves came as evidence pointing toward a stronger recovery from the coronavirus pandemic for the United States than for other countries.

In U.S. economic news, the latest economic survey showed U.S. manufacturing activity slowed slightly in January, while a measure of prices paid by factories for raw materials and other inputs jumped to its highest level in nearly 10 years, strengthening expectations inflation will perk up this year.

In Euro Zone news, the Euro weakened after Germany reported that retail sales plunged by an unexpected 9.6% in December after tighter lockdowns last year to curb the spread of COVID-19 choked consumer spending in Europe’s largest economy.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Monday when buyers took out the January 19 main top at 90.940. A trade through 90.030 will change the main trend to down.

The main range is 92.730 to 89.165. On Monday, the March U.S. Dollar Index tested its retracement zone at 90.950 to 91.370. This zone is controlling the near-term direction of the index.

The minor range is 90.030 to 91.050. Its 50% level or pivot at 90.540 is potential support.

The short-term range is 89.165 to 91.050. If the pivot fails as support then look for the selling to possibly extend into its retracement zone at 90.110 to 89.885.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to the main 50% level at 90.950.

Bullish Scenario

A sustained move over 90.950 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the Fibonacci level at 91.370. This is also a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 90.950 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the minor pivot at 90.540.

Side Notes

The index is currently testing the most important retracement zone on the chart at 90.950 to 91.370.

Aggressive counter-trend sellers are going to try to form a potentially bearish secondary lower top on a test of this zone. Bullish trend traders are going to try to trigger a breakout over the Fibonacci level at 91.370.

For a look at all of today’s economic events, check out our economic calendar.