The dollar index (DXY) has rather not coped well with the eventful week. In a nutshell, the market's narrative can now be summed up with the prospect that the FED's rate hike cycle is over, whereas the ECB and other central banks (BoJ is the exception) have yet to hike further. Thus, there is just no more interest rate fantasy in the dollar. At the same time, the stock markets are trading at solid levels. This also reduces interest in the dollar as safe-haven currency.
In the last newsletter, however, I had written that there will be a reality check in the market sooner rather than later. While on the one hand the list of risks is long (inflation, debt, geopolitical risks, climate change, global refugee movements) and surprisingly well ignored, on the other hand the positive aspects of the current low volatility market can be reduced to the vague hope of "artificial intelligence".
As long as the dollar trades above the major support zone 102/101, one can try dollar longs. Below the annual low (100.80 - 02feb), however, long positioning becomes critical. The support is very unlikely to hold a third time.
EURUSD -- 1.0931
The currency pair trades in bullish territory above the 50 ema and the mid Bollinger band. A test of the 1.1000/33 resistance zone seems almost inevitable. At the upper end of this years bigger 1.05/1.10 range, one could think about shorts again. Above the high for the year at 1.1096 (26apr), however, the rally could continue.
GBPUSD -- 1.2766
Nothing can stop the pound. Better UK numbers have lifted the prospects for a rate hike of 25 basis points to 4.75% (from 4.5%) this thursday. However, the RSI reached overbought territory last Friday (hod 1.2848) and sterling shows small signs of a correction. Above the previous high of the year (1.2680 - 10may) the bullish case is valid.
USDJPY -- 141.59
The Bank of Japan confirmed its expansionary monetary policy last week. Thus, the Japanese key interest rate remains at -0.10%, which makes JPY shorts still attractive even against the dollar. Nevertheless, I buy yen at this level.* On the one hand, the dollar has gained over 11% against the yen since the last low, contrary to its general weakness. For another, it is questionable how long the BoJ can continue its loose monetary policy. The latest CPIs already came in much higher than expected (3.5% vs. 2.5% exp.). An adjustment of the key interest rate is already clearly overdue.
Good luck,
Sebbo
(*reminder: my content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances.)