I am back from a long weekend and the holiday “Tag der Deutschen Einheit" is now also behind us. But the really exciting thing happened yesterday on the other side of the Atlantic with the deselection of the head of the US House of Representatives, McCarthy. At this point, I rate this news as a possible trigger for the end of the recent dollar rally. Contrary to my expectations, the dollar index (DXY) also closed green for the eleventh week in a row on Friday. With each additional week, however, the likelihood that there will be at least one red weekly candle increases.
The rally in US 10-year yields towards the 5% mark could also be over for the time being. This week we will see the non-farm payrolls for September. They will probably have to be very good to justify a further rise in interest rates at the long end. In the big picture, I am looking for dollar shorts this trading week.*
EURUSD -- 1.0503
The currency pair made it to the lows of the year. After a solid downtrend of more than 7% it is reasonable to take profit on Euro short at current spot level. However, I am not looking for dollar shorts against the euro. The short-term resistance can be found around the mid Bollinger band (1.0625). I would currently look for a fresh entry into shorts in the direction of the 50 ema and the 200-day line. However, these average lines are still a long way away.
GBPUSD -- 1.2133
Sterling is even more oversold at current spot than at the time of the last newsletter: “Unfortunately, we do not know whether the pound will have to go down another one or two big figures first” (MC #164) In relation to today's low, it was exactly 150 pips that the currency pair fell again. A countermovement could now start from here, which should run to the mid Bollinger band (1.2302) and the May low (1.2308). Nevertheless, one must also keep an eye on the lows for the year, which are unfortunately still some way off. The long scenario is therefore already over for me with a daily close below the big 1.2000 level.
USDJPY -- 149.13
It is all about rate differentials and dollar longs against the yen are the most crowded carry trade within the G10 currency space. Regular readers now that I expect a heavy sell off in this currency pair soon. Unfortunately, the 2022 annual highs are not far away. These could once again act as a magnet. In this respect, a daily close above the 150 mark should be accepted for the time being. However, I sold dollars again today and am now fully positioned.*
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.)
What level are you targeting in USDJPY?