I'm really not a fan of analysts praising themselves, but this time our last Morning Call was really on point, both for the technicians and the macroeconomists: “After the first consolidation phase in the first two weeks of January ended with an upward breakout, the dollar index (=DXY) is now once again in an upward (?) consolidation pattern (…) From a pure chart perspective, another upward attempt could materialise tonight, similar to the one in mid-January (…) A weaker dollar cannot be deduced from the short-term technical picture and the medium-term macroeconomic view.” (MC #180)
In the end, the dollar bears had to add very good NFP figures to the list of economic data on Friday, which hardly offers any arguments for weakness. It is not particularly important to what extent the figures really reflect a good economic situation, but how they contribute to sentiment. Rising hourly wages definitely have a positive contribution to inflation.
The likely scenario for the coming trading days will be a third consolidation phase, which will probably end with fresh CPI figures next Tuesday. Dollar bears could orientate themselves on the old may 2023 high at the 104.70 mark. Above this minor resistance level, however, one should get rid of longs until the CPIs provides clarity.
EURUSD -- 1.0731
The Head and Shoulders pattern has continued to work. The 50 ema was only exceeded intraday. In the short term, the currency pair could be supported here for the time being. Below 1.0700, however, euro longs are once again at high risk.
GBPUSD -- 1.2539
The daily close below the 200-day line is a bearish signal. Of course, a false breakout cannot yet be ruled out, but lower spot levels are more likely now. Above the 50 ema, the short scenario is over.
USDCHF -- 0.8724
“The Swiss franc has lost some if its shine and is trading weaker against the dollar since the beginning of the year. Above the low of the last year (0.8553), the more likely scenario is now rising spot levels” (MC #179)
The important support level at 0.8553 held last week and offered a good opportunity to enter longs again. The currency pair is very likely to test the 200-day line in the coming session. In this respect, I would use weakness to buy.
Good luck,
Sebbo