What is the USD doing?

[Mercury]

USD DX looks to have perhaps started a retrace/relief rally coming out of near term support on PMD.  The wave 1 (light blue) could be seen as an A-B-C retrace or a 1-5 so a higher high for a new wave B (green) is possible.  EURUSD will offer a better view on this I think.

[Mercury]

A strong retrace did occur on USD DX, all the way to the Fib 76/78% but there it turned and has put in a smaller scale 1-2 down.  Now seems set on making a lower low that the ST wave 1 (grey), which will bring up a test of the previous lows, a key ST support zone.  There is an unclosed gap below this, which gives me encouragement that a new lower low to at least close this gap will occur and after than we will see but should be set fair for a period of USD Bearishness into the Fed rate decision.   Chatter on that is for a 25BP cut but some are talking about a 50BP cut.  The latter would surely send the USD lower and precious metals higher..?  You never really know with these policy decisions, especially the heavily signaled ones but surely the task the Fed are seeking to achieve is to keep USD from getting into a massive rally as other Central Banks seem to be reopening their credit crunch saving policy tool kit (wasn't that all supposed to be over now that the economy has been saved... 🤣).  I think Fed rate cuts (big ones) is the beginning of the end.  Doubtless there will be the usual lunatic bullish response but the reality will start to sink in and I think sooner rather than later.  Still that is not for now, for now I see a period of USD bearishness but when this ends, well look out across the patch!

 

[Mercury]

Sell strength they say (or buy weakness if you want to trade against the USD).  It certainly applied to any USD pair FX trade one might contemplate today but that is how you get in on a good move.  On USD DX it certainly looks like a rocket on the launch pad BUT price is currently stopped at the resistance zone formed by the weekly chart channel breakout and retest prior.  IF the market turns now, at the Fib 76/78% off the 23 May high, then a strong and fast bearish move is indicated.  This could be consistent with a more extreme rate cut by the Fed than the markets are currently expecting, which would set the direction for the Fed rates on a ZIRP/NIRP trajectory.

[Mercury]

Another small leg up this morning to hit and rebound back down off the daily chart Fib 78% (off the wave 1 - blue - 23 May high).  Not a lot of resistance left above so I feel this one is critical.  There is NMD on the daily (not yet confirmed with a turn) and hourly.  I am looking for a break lower to give me confidence on this set up.  EURUSD is at the Fib 88%, the final chance for a turn (other than a double bottom but I wouldn't bet on that) and GBPUSD may be in the process of a breakout to the upside.  One to watch today.

[Mercury]

Break lower in prog but still need a candle close below...

[Mercury]

Traders positioning ahead of ECB rates announcement?  How likely is it that Draghi will do anything just ahead of Lagarde taking over?  If the markets have (big if) been pricing in a rate cut, or some other form of easing, then all Draghi has to do to send the Euro higher is do nothing.  Most of the time he does nothing except talk...

Technicals support USD bearish move (EURUSD bull).

[phillo]

On ‎23‎/‎05‎/‎2019 at 15:07, elle said:

I'm guessing that bar is being defended  !  

probably find out by Wednesday with this one ( Fed rate decision)

[Mercury]

That's probably right @elle, your Bar is on the Fib 62% long term chart.  Could get a turn around current price to form a wave B top OR another leg up to test the Triangle upper trend line before a drop.  All bets are off is the Fed disappoints on Wednesday.  With both EUR and GBP at key support areas these two alone could move DX.  Other pairs in the basket are in no mans land but if stocks do drop off then the Yen could get a boost against USD.

A couple of days to watch and wait.

[phillo]

On ‎29‎/‎07‎/‎2019 at 13:08, elle said:

probably find out by Wednesday with this one ( Fed rate decision)

done !

[Mercury]

It seems that everyone is down on the Fed; who would be a Fed Chair?  It's an impossible task to please all of the people all of the time and eventually, as night follows day and cycle follows cycle, they will fail as the markets crash and reset and recession bites.  You might as well try to control the weather...

So much for that but despite all the negativity the Fed did cut rates by 25 BPs, which is what they were signalling, so ok then.  Rate cuts against a currency normally lead to a drop in that currency but not this time...  Of course there is nothing normal about this "new normal".  USD - DX broke that fib 62% related resistance barrier, as @elle showed us but there is one more hurdle before USD sets off on a rampaging rally and that is an upper long term triangle (or narrowing channel) line.

As you can see from my weekly chart, the upper line is very strong with many solid touches and a nice prior pivot touch as well (very strong).  The lower line is weaker but that is to be expected given the move was/is bullish.  I have a clear and clear 1-4 wave cycle done and now we look to be, possibly. in a final wave 5 up to the wave 1 (blue).  If we see a rebound back of the channel line with other associated indicators then my retrace bear move to a wave 2 (blue) - rally in EUR/GBP et al, is on.  If we get a breakout of this formation then I will give up on the retrace scenario.

However, in my view, from a fundamentals perspective, in order to get a USD rally from here (and it would need to be a concerted and strong rally) we need to see the following:

• Signals from the Fed that there will be no more rate cuts, in fact hikes might be on the cards
• Associated to the above we would need to see ongoing positive data on the US economy (doubt we will get this) and strong earnings reports on US stocks
• Other currency CBs signaling lower rates and accommodating policy (USD relative attractiveness, especially in the bond market) and poor economic data
• Eventually a stock market top and crash - flight to safety - and an associated rally in PMs
• Eventually a recession/depression - flight to safety 

I would not be surprised to see the Fed committee talking up further cuts in the next set of speeches.  They need to offset the bad PR effect of yesterday and fast of heads may roll.

Even in my most bearish mindset I cannot see that we are there with the above criteria, but maybe, maybe.  We will have to see how the current stock Bear move plays out.  So if we are not there yet then USD should retrace, for at least a couple of months into the Autumn and then...

If anyone has a justification for USD rallying without any of the above I would love to hear it.

[Mercury]

Big time Yen rally today.  What could it mean?

• USD weakness to come?
• Stocks bear not done yet - flight to safety?

Another market for Bears to watch.

[Mercury]

While Stocks, Gold and Oil were going crazy today FX was relatively calm.  However the FX market was calmly going about its business and it looks as if my weekly chart resistance trend line held firm at a possible wave 1 turn.  There may yet be another test but for now a Bearish move is looking like ti could be on.

[phillo]

On ‎31‎/‎07‎/‎2019 at 19:05, elle said:

done !

tested - now back to @ that "Election  Level"

[dmedin]

A wee bit of simplification and/or clarification on those charts would help the rest of us out a lot.

[Mercury]

Not sure who you are addressing there @dmedin but if you have a question just ask, happy to answer.

USD broke through @elle's resistance zone and then bounced back off my upper channel line, thereby creating a new, slightly higher resistance zone, which has some prior pedigree.  I am looking at this as a bearish set up.  Previous I flagged that another leg up was possible before a bearish move so rather than negating my bearish set up this recent move strengthens the case.

Looking at the weekly chart you can see that adjusted resistance zone and a pin bar drop from the upper channel line touch that also coincides with a potential monthly chart upper Flag line.  This line is not yet valid on its own but as a mirror of the lower line, which has many valid touches it can be relied on in the future.  We have have strong NMD at the pin bar turn.  I am looking for a breakout through the lower channel line to confirm my bearish set up.

On the Daily chart you can see the pin bar in more detail.  The daily bar that resulted in the touch on the upper channel line is in a spinning top form (with a small body) and today's price action so far has continued the bearish move.  The EWT labeling is consistent with a top out and turn.  However we do not have NMD on the Daily, which is a bit of a concern and therefore the possibility of another leg up remains.  I will be watching price action on the 1H and 4H charts, especially on EURUSD, to give some clues as to whether we are more likely to get another leg up or a 1-2 retrace but I think it will be one of these scenarios.  Obviously a breakout through the upper Flag line and the overhead resistance zone negates the bearish set up.

[Mercury]

As with my EURUSD prognosis I see DX as in a relief or retrace rally that should test the resistance zone around the Fib 50% area.  The move down was a textbook 1-5 so now looking for a classic A-B-C back up to a turn and drop into a longer wave 3.

[phillo]

taking a "long term view"  the USD isn't really doing much atm, despite all the trade/currency war stuff - nice parallel trend lines though

[Mercury]

Agree @elle FX in general is quite while everything else seems to be frenetic.  FX is the biggest financial market in the world so one would imagine that if things were really kicking off in macro term USD would be moving.  The fact that it is currently in consolidation or more likely the beginnings of a turn, suggests to me that we are not there yet for recession/depression/inflation/Armageddon.  Therefore I predict a period of USD weakness but only as a counter-trend move to the long term motive bull market that will kick in when all hell does eventually break loose.

Currently I see a top in the DX (blue 1) followed by a 1-5 down to brown 1 ad now we are in a brown wave 2 retrace that looks like it may have topped out on Friday.  This would fit with my thesis that stocks are back on the climb and precious metals may be cooling off for a while.

[Mercury]

Potential channel breakout on the 1H chart.  Corresponding possible turn on EURUSD and a big rally move, soon to breakout perhaps, on GBPUSD.  Finally maybe some volatility on FX...

 

[Mercury]

Potential failed retest of the previous breakout zone on DX.  A break to a new low vs yesterday may signal a long awaited strong bearish phase for USD.

[Mercury]

A break of ST support looks immanent after a Fib 62% failed retest of the previous channel breakout zone.  A break hear is indicative of a larger retrace rally end and then comes the long awaited bearish phase on USD.

 

 

[Mercury]

This time?

[Mercury]

Like I said before, it's all about the dollar, bout the dollar, bout the dollar.

At present, assuming this is a sustained USD turn, who knows these days really, all key USD pairs are retracing hard.  I expect that to continue for the rest of the Summer and into Autumn.  Cue excessive central banker currency wars and related whip lash on stocks etc.  FX would seem to be a safer directional bet now.

[phillo]

On ‎31‎/‎03‎/‎2019 at 19:35, elle said:

I still think that break down bar level has to be revisited  

it's had it's visit & that zone between the two "yellows" is a "Do not pass" zone it seems

[Mercury]

I think you are right @elle, just not now, later when USD really kicks off and it wont just test that area it will cut through like a knife through butter.  Aligned to you recent Yen comment, I don't see Yen strength without USD weakness, unless, I guess, we get a bout of serious stocks bearishness.  In that case though I would also expect USD strength.

We will know soon I expect...

[Mercury]

Time to reprise the USD outlook.  The Fed (minor) rate cut and Jackson Hole is now behind us and serious market players seem to be holding fast to further Fed rate cuts this year (maybe soon) and/or other policy actions, which they believe will trigger a response from other CBs (although many seem to hold that this will happen regardless of what the Fed does).  The general zeitgeist seems to have it that USD will rally as wider economic issues persist and deteriorate and/or the US economy and currency is the least worst.  Also in a currency war situation the same people think the USD will be the go to currency but on the other hand the Fed has more room to play with.  Some people are holding fast to the Donald factor in an inane view that his tweets are the key driving force in the market, good luck with that one, and/or that we will have a China/US trade deal soon, good luck with that one too...

You can tie yourself in knots over all the whys and wherefores, which is why I don't worry too much about it.  So long as price action is making sense to me in terms of the technical road maps, and in terms of the fundamentals, I don't much care what triggers a move, just need to watch out for volatility around key calendar dates.  I guess the Fed and US NFP remain the key 2, as they have been for a long time now.  Will bad news remain good for stocks?  Don't care at this point.  What I am seeking is confirmation that the USD has turned into a long awaited bearish phase.

Let's look at the charts because the only thing we really have to work with here is price action and maybe other things like momentum and volume if you are so inclined, have the data and the skills to read it.  For most of us it remains price action.

On the weekly chart it is clear that USD (or at least the DX basket) has been moving up steadily but not in a definitive manner since early 2018 off a floor created at the beginning of 2008 (the credit crunch).  There is strong NMD at the recent turn, which occurred at the top of the channel (or triangle) and in close proximity to a down sloping trend line, that may be a large scale Flag (i.e. a way station on the route to much higher highs).  The junctions of such trend lines are often strong areas of Support/Resistance and so it appears to be in this case with a weekly pin bar and daily chart spinning top type ending candle.  However price does need to break through the lower channel line to confirm a bearish move in the medium term.

On the daily chart you can see that price dropped fast from the spinning top turn to put in a wave 1 (brown).  On shorter time frames you can see that this bearish drop was in a classic 1-5 wave from.  After that we saw an A-B-C retrace to wave 2 (brown) just short of the Fib 76% zone.

On the 1H chart we can see this wave 2 (brown) in close up, the turn occurred with NMD then broke down through a short term channel before rallying hard to put in an effective short term double top (second one was slightly lower) and then dropped again through short term support.  Price has since rallied to test and fail at that short term support (now resistance).

So now it just remains to be seen whether price drops away from here or retests and resumes it bullish journey (or puts in some further consolidation indecision ahead of the next Fed and US NFP).  For me the outlook looks bearish from here, just need the price action signals to confirm.

[Mercury]

USD took another small leg up to the Fib 76/78% zone (mirrored in EURUSD) and then turned around US markets open on NMD and overbought oscillators.  Retrace is a descent A-B-C, lets see if this one confirm with a sharp drop away.

[Mercury]

USD - DX arrives at a critical juncture for me with resistance from both a long term down sloping trend line (potential Flag line) AND an up sloping upper Triangle line.  Such confluences of trend lines are, in the main, especially important areas of S/R.  A breakout to the upside here will result in me abandoning my long held retrace bearish move scenario, which would, in my opinion, also signal the beginning of the resolution to the current economic cycle.  Personally I don't see that we are there yet but we could be and a resolution to this critical juncture will go a long way to helping me make up my mind on that one.  I favour the bearish retrace still and we have strong potential NMD on all chart time frames and a credible EWT count up to the wave 1 (current turning point).  EURUSD and GBPUSD are also at critical points and USDCAD is approach a potential turning point as well.  USDJPY has been bearish for a while and I see that continuing, in fact this pair may even show stronger moves than the others.  If these turns work out then DX will drop like a stone.  Add to this Oil and Copper and we have an interesting mix right now that could drive some strong directional moves.

 

[Guest nash3]

Mercury time to let go of this idea. King dollar is on the move

[Mercury]

@nash3 Based on?