We were right in our last newsletter in assuming that the upward trend in the dollar has been interrupted for the time being. The dollar index has now ended six consecutive trading days in the red. If US CPI figures surprise to the downside this afternoon (european), the seventh red candle could follow. There is also some room for a sustained correction in some dollar crosses, whereas other crosses have not reacted at all so far or may have already seen their high (against the dollar). Irrespective of this, I stand by my opinion that the dollar will have to correct further in the medium term. While the current weakness of the dollar is more due to the risk-on movement in the stock market, the expansive US budget policy is not yet playing a major role. In my opinion, however, that will change soon.
EURUSD -- 1.0626
The currency pair closed clearly above the mid Bollinger band yesterday. Above the minor resistance at 1.0635, the way to the 50 ema (1.0709) would be open. Maybe we will already see a proper spike this afternoon. A clear daily close below the 1.0590/80 support zone probably signals the end of the correction.
GBPUSD -- 1.2299
The British pound also still has room for another upward correction. Above the 1.2308 resistance level, however, the 50 ema and 200 dma should finally stop the recovery in the pound. Above these average lines, however, you should get rid of shorts. Short-term support can be found at the mid Bollinger band (1.2240).
USDJPY -- 149.10
A major dollar short of mine (regular readers know) unfortunately did not correct at all. The interest rate differential between the two currencies is still too interesting for many investors and makes them ignore the risks. In addition to the US budget policy, I would like to point out the BoJ's monetary policy, which is far too expansionary in view of the moderately high inflation. From a technical perspective, ideally the 150 level will hold. Above that, we are very likely to see a test of the 2022 highs.
USDCHF -- 0.9004
“From a technical perspective, the 200-day line and the 0.9000 level may be the next opportunity for a renewed entry into CHF shorts” (MC #166)
Together with the 50 ema (0.8979) the support zone is well defined now. Active players with good money management could certainly try a long here. However, I personally would rather get involved with a hedged FX option. The implied volatility for the 2 week tenor is quite low at 7.21% and the chances are good that the 100 pips break evens up or down will be reached. In the medium term, I think the bottom side is the weak side.
(source: investing.com)
Good luck,
Sebbo