The dollar index (DXY) had its sixth consecutive green trading week. This certainly surprised some market participants given the swan song on the dollar that has been widely sung in recent weeks. While the currency pairs under consideration here have little to do with “BRICS (plus)”, some protagnonists certainly felt inclined to short the dollar in general. Their stops are likely to have supported the dollar rally. However, a persistently high yield level and the hawkish Fed minutes are likely to have been the main drivers.
This brings the dollar back towards the upper side of this year’s 99.57/105.83 trading range. However, the next resistance is already at the 104.70 level. A breakout above this mark could be difficult for the time being but should of course be respected.
EURUSD -- 1.0805
The currency pair is trading in bearish territory below the last minor support (1.0835) and the 200 dma (1.0808). However, the RSI is already showing a very low level again, which has repeatedly supported the euro this year. So there could be a counter-reaction in the short term after the euro has fallen about 4.25% since its high for the year on 18 July (1.1276). In the medium term, however, I remain sceptical about the recent euro strength and keep an eye on the 1.0500 support level for a retest of this year’s lows. Above the 50 ema, I recommend to get rid of shorts.
GBPUSD -- 1.2575
With the weekly close below the 1.2615/1.2590 support zone (just barely) the chances are increasing that the downtrend is not over yet. The 200 dma (1.2404) is looming and a reasonable target zone for shorts. Above the mid Bollinger band (1.2707) and the 50 ema (1.2718), the short scenario is over.
USDJPY -- 146.50
The dollar rally also continues against the yen. After testing the important 145 support with an intraday low at 144.54 and close at 144.68 last week Wednesday (which certainly triggered some additional shorts), there was then another very solid weekly close well above the 146 mark (146.40). Thus, what I wrote in the last Morning Call still applies: “Above 145, you should keep your hands off shorts” (#158).
Good luck,
Sebbo
Are u sharing your opening positions ?