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What is the USD doing?


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Looks like the USD is not going to give up without a fight, why would we expect it to?  DX price fell and turned just short of the previous low in what could turn out to be a wave B rather than a 1.  On the 1H chart there was decent PMD to support this move so I would expect a short rally period and a turn at a lower high wave 2 at a minimum BUT if we see a strong rally then the wave B is in play and new higher highs to a wave C are on the cards.

2 scenarios:

  1. The up down on the 4H chart is a wave A-B and now we get a strong wave C rally to top out at 2 (brown) and turn back down into a large wave 3 bear move.  Most likely candidates are Fibs 50/62% but price action will enlighten us on that later
  2. The move down is a wave 1 after a wave 2 (brown already done - see 1H chart) so we see a smaller rally that turns lower than the FOMC spike candle top.

Impossible to know which as yet so all we can do is nothing yet and wait for price action to play out.  With US NFP and ISM manu data later today and ISM non mani data early next week there is plenty of resolution impetus to come.

The key in any case is a break of the support zone at circa 9680.  I am slightly favouring scenario 1 as I would expect USD bulls to put up a decent fight but will remain open to either.  I remain medium term bearish USD.

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  • 3 weeks later...

USD DX top and turn at the top of the weekly chart channel/Triangle looks set to be confirmed.  We have seen price make a Fib 50% retrace and turn back down and then put in a smaller retrace, again to the Fib 50%.  The markets are now making an approach on the lower channel line and horizontal support levels.  Breaks of these will see the likes of EURUSD and, together with stock declines, USDJPY make breakouts of their own.  After all the USD strength over the past years this will surely be pivotal for many markets...

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In relation to my recent GBPUSD bullish scenario post, USD (DX) appears to be keeling over bearish, although we have seen this a few times now so lower lows are required to confirm.  You could wait around until it breaks below 9650 I suppose but the set ups on GBP and EUR are good so why wait when you can get in with low exposure?  USDJPY and USDCAD may also be showing some signs of turning bearish, which would provide the strength needed to support a wave 3 call.  We have NMD at the wave 1 (blue) [note this may not be a wave 1 but a wave B that takes the market down to a much lower level, maybe 8000, which would be consistent with my GBPUSD bullish scenario, more on that another time].  The turn occurred at the upper line of a Triangle consolidation, consistent with a wave B retrace.  The bearish drop is a wave 1 (hmm, could be an A-B-C I guess so not conclusive yet).  Now we appear to have a credible retrace to a decent resistance zone and a bearish candle on Friday.  As I said I really want to see a lower low but for now I maintain a cautious bearish stance on the USD, at least on GBPUSD and EURUSD with others yet to confirm.  Any significant bearishness on stocks would probably send USDJPY crashing if there is already a USD bear mood about.

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The day isn't over yet but so far things are shaping up nicely for my reversal call.  After the pin bar I noted in the previous post today USD has taken a tumble.  There was significant NMD at the pin bar and now price is heading to test the weekly channel line.  A break of this, and associated USD pairs related critical points, should kick off a sustained period of bearishness for the USD.

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USD DX is at the first of two important support levels.  A break here should result in a drop to the next and crucial support level, a break of which would surely cement the bear phase...  Possible relief rally before the break of the channel to watch out for.

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I'm anticipating a relief rally on USD consistent with my set up on EURUSD.  I think we will also see a stronger retrace down on GBPUSD, perhaps a retest of $1.30 before any resumption of the rally but that would be predicated on a Tory majority in the election, which makes trading GBP fraught with danger this close to the polling day.  Possible exception to the USD rally could be USDJPY, which seems to have turned bearish in line with negative economic data out of the US, odds are for this to continue.

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1 hour ago, dmedin said:

Could it be a H&S?

Technically sound but usually true H&S patterns come at the end of major trends, which this isn't in my view.  Also I am wary of H&S patterns that do not have a more horizontal trend line unless they are very long term (and ideally also part of another pattern such as a Triangle such as on Gold/Silver).  If you look at my weekly chart below I think the 2016/17 example is more classic, it also benefits from a gap breakout and failed retest of the neckline, again classic.  However it is academic for me in this case as the potential neckline (note I have a different Left Shoulder placement that you I think) IS coincident with my Triangle line so either way really.  I prefer the Triangle channel set up but in any case a break lower is the key here.  After that it would be a question of whether we see a short/medium term retrace to, say 9100, or a much longer term bearish phase.

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Looking at a period of USD strength to complete a retrace.  As noted elsewhere I expect GBP and EUR to rotate lower for a while, the former until the election, the latter until support is hit, which may occur around the same time as the UK election as probably clarity on Brexit would lift the Euro as well as GBP.

My call is for a Tory majority, better than May had but not off the charts.  I have spoken to many Labour voters who are conflicted and the Ashworth thing bears out what I was hearing about how the Northern areas are feeling (see link below if you haven't already seen it - priceless, almost as good as Corbyn's Andrew Neil interview).  In London many remainers I have spoken to are likely to prefer to get on with Brexit rather than let the Marxist/IRA sympathiser into No. 10, which Ashworth also seems to agree with them on..., and a lot also do not want another referendum for democratic sanctity reasons (i.e. they are accepting the defeat).  It does rather seem that whenever BoJo makes a Gaff (and I can't believe he is the best the Brits have to offer) the Labour moderates find a way to give the Tories a leg up...

https://www.bbc.co.uk/news/election-2019-50726592

A Tory majority puts Brexit to bed, other than the exact trading and political relationship with the EU, which is not nothing but at least the toy throwing will be over.  The spending plans light a fire under GBP because interests rates will have to go up.  This takes up to, say, 1.38 at which point we consolidate and then we see if a breakout is staged or a reversal kicks in, which will have more to do with USD and global economics at that point than the UK.

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34 minutes ago, CharlotteIG said:

People believed US would be strong today

Why?  Money comes out of U.S. treasuries and safe havens and into 'riskier things'.  And isn't the Fed about to start pumping 'half a trillion' into the free-money trough that all the big banks have their snouts in ...

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Don't see the Fakeout @dmedin, but my long term channel lines are in a different position to yours, can't quite make out where yours is from the chart you posted.  My analysis has a breakout of the weekly line (or that potential neckline you pointed out previously) and a failure to break a key support level resulting in a relief rally (in prog).  Now than the current phase has breached the previous turn (A on my 1H chart) the market could turn to complete an A-B-C at any point, indeed it may be in the process of doing just that.  It could equally retrace up to a more conventional resistance zone.  Currently most major USD pairs are in retrace (USD bullish).  Of course DX is dominated by the Euro so it is quite possible for DX to turn behind a Euro turn, maybe with one other in the basket (USDJPY perhaps) and leave others still struggling against USD (like GBP).

Short term some further USD strength is likely, albeit varied across the various pairs but long term I remain bearish USD on the basis of the breakout.

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