The Dollar Index (=DXY) is slightly offered this european morning which could put an end to the recovery rally of the last few days. The minor resistance at the 104.20 mark has therefore held for the time being. However, dollar bulls need a breakout above the 104.50/60 resistance zone to turn the bearish picture.
The next few trading days will certainly be exciting. Tomorrow the monthly jobs report (NFP) will be published, and next Tuesday the CPI figures, also for November. And finally, the next FOMC meeting is scheduled for Wednesday. In this respect, it could make sense to keep positions rather small. Nevertheless, it may be possible to profit from a short-term increase in volatility. At the same time, medium-term players should be concerned with the approaching year-end, which may be prone to very one-sided movements as liquidity thins. The course for the last trading days of the year is likely to be set from next Thursday.
EURUSD -- 1.0771
The currency pair is trading two big figures lower compared to the last update. Our suggestion that levels covering the upper end of the 1.0500/1.1000 range are buy levels for players in need of dollars has thus proven to be correct. Our last update on the EURUSD options market also had the right idea: “These low levels were outside my expectations, but they may now offer opportunities for re-entry into a long vol position or hedging strategies for dollar buyers.” ATM implied volatilities have already risen by 0.5 percentage points (now these strikes are of course no longer ATM). This is quite astonishing in view of a market that generally refuses to see any risks at all at present.
Below the 200-day line, I find it difficult to become bullish on the euro. The next important support level (50 ema) is also not far away. In this respect, short-term trading is likely to take place between these two average lines for the time being.
GBPUSD -- 1.2576
In view of the upcoming stream of economic data and the approaching year-end, this currency pair should also be traded with as little conviction as possible. Nevertheless, I would seriously question the bullish or bearish picture at spot levels outside the 1.2450 / 1.2715 range. In this respect, I am neutral here in the middle of the range and would not open any new positions.
USDJPY -- 144.89
Regular readers know that I have been long the Japanese yen big time. I took profit today. Unfortunately, I paid a lot of carry in the meantime, so the profit was rather small. In the short term, however, the dip here could be over if the support at the 144.44 level holds and the dollar reclaims the 145 treshold again. In the medium and long term, however, I consider a further dip below the 200-day line to be the more likely scenario. A possible target would be the 140 mark. The coming days may offer another opportunity to get back into shorts.
Good luck,
Sebbo