I am now a few days back from the camping vacation, but have only watched the market for now. This trading week has three central bank meetings to offer (26 FED, 27 ECB, 28 BoJ; see Calendar), which may provide some volatility. In recent weeks and months, there has unfortunately been relatively little movement and risks are generally ignored. But I still have hope that this will change soon: “These impl Vols are almost at pre-crisis levels, where interest rates were at zero percent and central banks pumped massive amounts of money into the market. Let everyone decide for themselves whether today's monetary and economic situation is the same.” (Market update #17) For example, EURUSD implied volatilities may have bottomed out after all.
(source: cme group, own representation)
The dollar had a good run in the last five trading days and the dollar index (DXY) even made it above the former 100.80 support level. However, this level must survive the upcoming events for the dollar to continue to rise. Below that, it becomes critical for the bulls again. Accordingly, there are also important marks for the individual currency pairs.
EURUSD -- 1.1086
After a crisp rise within a few days to 1.1276, we currently see a correction of the overbought situation. Now it is important for euro bulls that the 1.1033/96 support zone holds and the euro quickly reaches levels above the 1.1200 mark again. Conversely, this means for the bears that the 1,1200 resistance level must hold. I would no longer short the euro above that. By the way, the 3mth EURUSD call (hedged) presented in the last market update performed very well. Those who have closed their delta above 1.1200 can buy here again without stress.
GBPUSD -- 1.2832
In sterling, the picture is very similar to that in the euro. The pound had a crisp rally against the dollar to a high of 1.3142 on 14 July. Since then, however, the currency pair has been offered. The jun high (1.2848) and the mid Bollinger band (1.2850) should deliver some support now. The RSI also shows a neutral level again.
USDJPY -- 141.06
The mid Bollinger band (1.4169) stopped the recent dollar rally against the yen for the time being. With a FED that may be done with its rate hike cycle and a BOJ that is overdue and may start soon, I lack imagination as to what should drive the exchange rate further up in the medium and long term. I am sticking to looking for JPY longs.* Ideally, the 142.25 resistance will hold this week.
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.)
Glad you’re back, I hope you had an enjoyable vacation!