Last week I went on my annual fishing vacation with my father and brother. And of course, during this period, the dollar index managed to break through the resistance zone at 102.20/40. I hope that you were at least able to take advantage of the dollar strength (EDIT: in an earlier version it incorrectly said weakness). However, one must not overinterpret the movement. The implied volatilities have not reacted, but on the contrary are even somewhat softer compared to our last observation point. In this sense, the market remains relaxed and does not see the risk of a further rising dollar. With respect to individual currency pairs there are indeed some major hurdles the dollar has to overcome.
EURUSD -- 1.0818
The currency pair is trading around/above the 1.0800/7087 treshold that has been support and resistance zone at many times. Euro bears need a clear break below the lower Bollinger band (1.0763) to become confident. Euro bulls, on the other hand, want to look at the 50 ema (1.0880) from the north. In the short-term picture, I therefore expect a trading range of 1.0760/1.0880 as long as the news situation (debt limit e.g.) does not change.
GBPUSD -- 1.2447
Sterling is trading around the 1.2447 pivot level again. From a technical point of view last week’s correction may be used to get into longs above the 50 ema (1.2410) and the lower Bollinger band (1.2375). However, one should be careful with longs, because below 1.2350 there are no more supports until the 1.2000 level. Regardless of this, I think a test of the 200-day line is likely in the medium term.
USDJPY -- 137.83
The third test of the 200-day line (137.10) was finally successful last week. The bearish scenario is thus over for the time being. Next level of interest to the upside is the psychologically important 140 mark. Unfortunately, no false breakout can be ruled out at this point. In this respect, I would keep long attempts rather small. Regardless of this, I stand by my approach that we will see lower spot rates again in the medium and long term. The question is just from where?
Good luck,
Sebbo