“In the short and medium term, however, I see a risk that the dollar could test the 2023 highs again. The CPI figures tomorrow could be a trigger if they deviate upwards from analysts' expectations.” (MC #189)
We were right to fear that the dollar index (=DXY) could very probably rise above the 105 mark in the short term. Those who bought FX options because of the two-way risk ahead of important economic figures were on the safe side. The implied volatilities are already trading higher and your FX options should be well in profit.
If the situation does not reverse today, the dollar index has the 107 level as its next target. That is now my base scenario. As usual, we will discuss the individual currency pairs below:
EURUSD -- 1.0646
The currency pair is trading well below its former 1.0724 support. As long as the euro trades below this level, the short case with a target of 1.0500 applies. Nevertheless, I recommend short-term investors to hedge part of their options delta or even take profit on the entire position. After all, the euro has fallen two big figures since the last update and the weekend is just around the corner. Directional trades are easier now with the break of the 1.0724/1.0981 range.
GBPUSD -- 1.2476
The picture in the pound is less clear at the moment. The currency pair is poised to leave the 1.2500/1.2800 range to the downside, but how sure can you be 24 pips below 1.2500? If you are also active with options in this pair, hedge your delta and wait and see.
USDJPY -- 153.32
The ascending triangle pattern was completed upwards like in the textbook. No short attempts should be made above the 152 mark for the time being. The currency pair is in no man's land. And you have to look back to April 1990 to find a usefull resistance level at 160.35. Nevertheless, there may be a spot level that calls the BoJ into action. I can imagine that the Japanese central bank will keep an eye on the 155 mark for the time being. But that is only a vague idea. It will be very difficult to intervene with lasting success against the recent rise in US yields.
AUDUSD -- 0.6491
The 0.6522 pivot remains an important mark, which ultimately also forms roughly the middle of the 0.6442/0.6625 range for the year to date. At the moment, the downside looks more at risk. I am not looking for longs below the 50 ema (0.6543) and the 200 dma (0.6541). I could even imagine another big dip towards 0.6350 in the medium term to wash out the remaining longs. But that is pure speculation at this point.
Have a nice weekend!
Sebbo