What is the USD doing?

[CharlotteIG]

58 minutes ago, dmedin said:

 

Wish I'd known about this earlier.

I'll try and keep you up to date. With the US we have US Fed's Evans speech today at 17:40 GMT. Tomorrow the USD Initial Jobless Claims (Dec 13)  is announced 13:30 GMT, prev 224K. 

[dmedin]

I guess the 'technicals' didn't confirm USD bearishness after all.

But then again, do the 'technicals' ever confirm anything?  (Unless it's to 'confirm' something that's already happened, LOL)

[Mercury]

On 17/12/2019 at 10:18, Mercury said:

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.

🙄

[dmedin]

😓

[phillo]

The answer to the question to this thread has to be " not a lot "

[phillo]

daily chart ..............................

[dmedin]

Looks like the completion of a complex H&S (one which has double-headed shoulders), look to short USD versus the various pairs or the dollar index itself (not sure why you would as it requires more leverage, has a higher minimum bet size and a wider spread...).

[Mercury]

Christmas is done, guest have left (guests, like fish, go off after 3 days!) and luckily it is the weekend and markets are closed so I have a bit of time to take stock.  I was watching the markets carefully over the past 2 days though as I suspected a move on USD in particular and it didn't disappoint with turns at critical junctures on GBPUSD and EURUSD, with AUDUSD breaking higher after an earlier (advance signal) turn at its critical juncture and USDCAD breaking through a medium/long term trend line to the down side.  For some time I have been tracking a USD breakdown and it now looks like we may finally get it.  Some of the primary pairs are hard to assess in a big pitcure sense, although my alternative GBPUSD analysis (major bullish phase) may hold true but DX and possible USDJPY look quite interesting from a big picture perspective.

So looking at DX it seems the question posed by the title of this thread is about to be answered.  USD is going bearish, at least for now.  I want to see a break of the 9630 area next week and then a break below the 9530 level will be critical to backing up the bearish case I feel.  Taking a large step back and zooming out to the long term charts to see what scenarios may exist from a  technical perspective I see 2:

1. The scenario I have been leading with for a long time is that this bearish move will be a 1-2 (blue) retrace prior to a major rally phase for USD.  This would coincide with a major drop in stock and bonds in my opinion BUT I would expect those markets to have turned bearish already so I am now less convinced of this scenario.  Target zone for this scenario to terminate would be around 9110, the monthly chart Fib 38% level.
2. My new lead scenario is that we will see a much deeper USD retrace and that this move will be in an A-B-C (pink) form that will set up that long term rally.  During this time I expect (and will be looking for) a top out and break down in stocks and probably bonds (as yield curves rise).  There will be the inevitable relief rally on stocks and then the big one.  Note this could take a bulk of 2020 to develop, although that first breakdown could happen soon and travel quickly.  I anticipate that the fundamentals/macro backdrop to this will be deteriorating global economic performance as exhibited in the key data metrics; basically a continuation and deepening of the trend we have seen over 2018/19. Target zone for this scenario would be a retest of the monthly chart neckline and Fib 76/78% zone (circa 7870).

On the technicals front I see the following:

• USD looks to have bottomed in 2008 with a Head & Shoulders chart pattern and then broke out of the neckline (or Triangle if you prefer) in 2014 and completed an large A-B-C in what I believe to be a wave A (Purple), which concluded 2 Jan 2017 with negative momentum divergence (NMD) at the turn.
• The next phase was a straight 1-5 down to wave A (pink) that started the recent rally phase (again 1-5) that we may now be able to call as ended on 30 Sept 2019 in a wave B (pink).  Again NMD (weekly chart) at the wave B (pink) turn.
• On the Weekly chart there is a strong rising triangle channel, the upper line of which has a prior touch anchor (extra strong) and many current touches and the lower line has the requisite 3 touches for validity.  There is also a possible H&S formation to support the turn but as the neckline is coincident with the Triangle channel this is extra technical support, not critical to the assessment.  I prefer the channel version.  There is also a H&S and neckline breakout on the previous turn (the wave A purple), which is quite text book in nature.
• Critically we seem to have a breakout and failed retest of the channel/neckline now.
• On the daily chart we can see a shorter term channel breakout after the wave B (pink) turn and then a series of 1-2 retraces (Brown and light blue), that appear to be setting up for a strong bearish break lower.  There was NMD at both B pink and 2 brown (also NMD on the 1H chart at 2 light blue).  Note that both 2 brown and light-blue turned around the Fib 50% levels and in the case of 2 light blue, the final turn, this occurred at a confluence of the MA200 and MA50.  I expect a Death cross to appear in the coming days.
• As mentioned above, I am targeting two near term support levels for swift breakouts.  If my scenario 2 is correct then this phase should be a wave C, which should proceed quite quickly and carry a long way.  Odds are it will proceed in a 1-5 form rather than an A-B-C as this retrace is a simple form and not a complex one.  So the whole phase could proceed quite quickly, maybe only a few months...  This is a superb opportunity to make some large points gains quite quickly!  If it plays out... 

I do not trade DX, I just use it for analytical purposes.  If you look at EURUSD, GBPUSD and AUDUSD you will see turns at key junctures and a breakout higher on the latter, all offering great Long trades.  USDCAD has also broken a key trend line to the down side for a Shorting opportunity.  USDJPY is yet to join the party but could catch up big time, especially if stock take a stumble, some signs that this is on the cards in the NY.

For the record I am Long the first 3 and Short CAD and watching JPY for a potential Short.  Gold/Silver traders seem to have anticipated this USD move (and maybe stocks softness) and broken out of a Triangle consolidation, which I traded Long prior to Christmas.  So net I am wishing the USD a happy bearish new year...  At least for the first quarter...

[dmedin]

1 hour ago, Mercury said:

guests, like fish, go off after 3 days!

Three hours is more than enough for me ...

[Mercury]

First support break I am looking for is coming up.  This appears to be happening across many USD pairs including, crucially, USDJPY, which may be supporting a period of stocks bearishness as suggested.

[CharlotteIG]

Heads up, these figures out at 14:00 GMT tomorrow:

USD Housing Price Index (MoM) 

Prev: 0.6%

Est: 0.3%

 

USD S&P/Case-Shiller Home Price Indices (YoY) 

Prev: 2.1%

Est: 2.2%

[Mercury]

51 minutes ago, CharlotteIG said:

Heads up, these figures out at 14:00 GMT tomorrow:

OK but the big one for the longer term picture is the ISM manufacturing data on Friday...

[phillo]

On ‎22‎/‎12‎/‎2019 at 15:56, elle said:

daily chart ..............................

2nd attempt

[Mercury]

Overall it looks like the USD has now indeed turned bearish with both a break and failed retest of a credible weekly channel line and now a break below recent support.  We may get a small retest of the recent support break, as with many pairs, but after that then the next major critical juncture will be the 9530 area, a break of which will surely open the bearish floodgates...  My lead scenario now it that we have completed a wave B in September and are now entering a wave 3 of wave C, very bearish if this materialises.

[Mercury]

End of the week added a small 1-2 relief rally that turned at the Fib 50% and headed back down.  Yet to break lower again but if we see that next week then I expect many USD pairs to run hard.  On the Daily chart we can add a Death Cross to the Techncial set up.  The case for further Fed rate cuts must be growing with the ISM manufacturing data.  If we see similar slippage in key data releases next week I can see the odds of a rate cut shortening, which should fuel a USD bear move.

[dmedin]

Shlomo Bernanke has just declared that the Fed can keep the economy going indefinitely by giving away more free money to the billionaires.  This is GREAT news because it means governments don't have to spend a penny on upgrading infrastructure, building houses for massively overcrowded cities and such.  Folks, it will be 'business as usual' in the land of the free until the Day of Judgement!  Hoo-rah!

https://uk.reuters.com/article/uk-usa-fed-bernanke/bernanke-fed-has-ample-clout-to-fight-downturn-if-toolkit-used-properly-idUKKBN1Z400L

Edited January 5, 2020 by dmedin

[Mercury]

3 hours ago, dmedin said:

Shlomo Bernanke has just declared that the Fed can keep the economy going indefinitely by giving away more free money to the billionaires

🤣

[Mercury]

Strong relief rally on USD of late, doubtless due to the perma bull thinking that the US economy is AOK so no need for further Fed rate cuts.  ISM manufacturing belied this but the Perma bulls cling to the services and NFP numbers like they are the holy grail...  US NFP?  Opps!

DX might be at a credible turning point here with a plausible A-BC retrace form to the rally.  The turn is at key Support/Resistance and on NMD.  A break lower here is vital or course and we may yet see another relief rally before any bear move really gets going but with CAD and AUD looking strong vs USD at present and EUR turning this could get interesting for USD Bears in the coming days.

 

[dmedin]

9 minutes ago, Mercury said:

US economy is AOK so no need for further Fed rate cuts

 

The 'talk' according to Reuters is that dollar will be strong in 2020 and the Euro might pick up in 2021. 😮

[Mercury]

1 hour ago, dmedin said:

'talk' according to Reuters

That's the media for you.  I'm sure they had lots of justifications.  Typically media outlets cotton on to trends towards he end not at the beginning.  If they were any good at doing anything except reporting what has already happened they wouldn't be in the media...

[Mercury]

USD DX (and associated FX pairs) have not been moving as I would have expected for a clear simple breakout in terms of price action and EWT labeling.  I tend to avoid the more esoteric versions of EWT as I feel this is about trying to fit EWT to price action by bending the rules.  The exception to this is the range of complex retraces, which I do buy into.  Anyway the main issue I have is that the wave labeling for the rally and subsequent drop back on many FX pairs is not clean.  Similarly the DX is a bit murky.  That said I maintain my bias that USD is heading down, it just may take a bit of a tortuous route in the short term.

Looking at the daily chart all of the previous assessment (see above) holds and it is possible that we have seen a final turn down on Friday at a zone of significant resistance with now 3 failed attempts to break back up through it.  This is the zone where the weekly chart lower channel line (and possible head & shoulders neckline) was broken in early December.  However it is equally possible that we may see a drop down and turn with a higher low and a higher retest of the weekly channel line around the Fib 62%.  I see similar set ups across many of the USD pairs.  Until this is resolved I am not confident of any existing Shorts so am keeping close stops until a break of lower support.  If the turn down is the correct call then I am in and can add in a sell the rallies strategy.  If the alternative higher high bearish turn is correct I will get stopped out for little or no loss (or maybe a profit on reversal signals) and seek a new higher Short entry.  I have no Long USD scenario at this time.  I have included EUR and AUD for perspective.  Also note I am biased to GBPUSD bearish phase to continue even if EURUSD rallies, at least for a time.

[dmedin]

Have you had any 'luck' trading FX?  Total effing disaster for me.  I'm toooooo stoooopid

[Mercury]

1 hour ago, dmedin said:

Have you had any 'luck' trading FX?  Total effing disaster for me.  I'm toooooo stoooopid

Not about smart or stupid.  It is about having a methodology you have honed over years and are comfortable with and within that rock solid rules for entering a trade and placement of stops.  It is also about NOT listening to naysayers who hate anything that upsets their world view, such is their insecurity, and not following other people but rather following your own method.  If your method is not working it can be because it is flawed or because the market needs to turn in your favour (i.e. timing is not yet right).  Patience and discipline are the two most important aspects of financial markets trading in my opinion.  Also NOT trading too many instruments at one time.  You have to have focus.  I may track FX and take occasional positions when the signs are good but the majority of my trading is not in FX at present because the move has not yet manifested.

As regards FX, it has been in a slow declining (vs the USD) trend for the past year or more so not the best place to be either long or short, which is why I have been mostly elsewhere.  What I am looking for in FX is a turn and breakout of this phase, which is looking increasingly like a contrarian reversal against USD.  If this happens then there will be a bucket load of points to collect, just have to spot the breakout and get in on the trend.  We are not there yet but maybe on the cusp.  That's trading in a nutshell.  You have to wait and wait and try things without losing much until you catch that move.  Most of the big time traders say they make most of their gains on 5% of their trades!  My strategy is win big lose small, the hit rate is irrelevant.

BTW: when I say contrarian it is opposite to the broad market expectation and bias.  Arguments for a contrarian continuation of the trend are bogus as that isn't, by definition, contrarian.

[Mercury]

USD Dx is stuck at a point of recent resistance but price remains within a weekly chart channel and while it does I am expecting the rally to continue with breakout to the upside.  Most pairs look similar, except for USDJPY, which is looking a bit bearish, maybe Yen traders are smelling a stocks hit..?

[CharlotteIG]

FYI at 13:30 GMT today: 
USD Core Personal Consumption Expenditures (QoQ) (Q4) 
Prev: 2.1%
Est: 1.7%

USD Gross Domestic Product Price Index (Q4)
Prev: 1.7%
Est: 1.8%

USD Personal Consumption Expenditures Prices (QoQ) (Q4)
Prev: 1.5%
Est: 1.7% 

USD Initial Jobless Claims (Jan 24) 
Prev: 211K
Est: 215K

 

USD Initial Jobless Claims 4-week average (Jan 24) 
Prev: 213.25K

USD Gross Domestic Product Annualized (Q4) 
Prev: 2.1%
Est: 2.1%
 

Will update you on outcome 

[CharlotteIG]

Update: 

USD Core Personal Consumption Expenditures (QoQ) (Q4)

Prev: 2.1%

Est: 1.7%

Actual: 1.3%

 

USD Gross Domestic Product Price Index (Q4)

Prev: 1.7%

Est: 1.8%

Actual: 1.5%

 

USD Personal Consumption Expenditures Prices (QoQ) (Q4)

Prev: 1.5%

Est: 1.7%

Actual: 1.6%

 

USD Initial Jobless Claims (Jan 24)

Prev: 211K

Est: 215K

Actual: 216K

 

USD Initial Jobless Claims 4-week average (Jan 24)

Prev: 213.25K

Actual: 214.5K

 

USD Gross Domestic Product Annualized (Q4)

Prev: 2.1%

Est: 2.1%

Actual: 2.1%

[Mercury]

USD took a turn for the worst yesterday.  I'm sure there will be many experts opining on what is driving this.  All that I know from the charts is that it more or less happened when US large caps turned red on Friday morning.  USD had topped out on Wednesday but really started to run down on Friday about 7am.  I would not conclude that USD and stocks are in lock step from this, merely that the initial drivers for both may be connected.

From a technical perspective I am unsure yet whether we will now see that bear phase I have been tracking for ages or another leg up to a new high first or an intermediate scenario, which is my lead option (see chart below).  For now I am expecting a test of the weekly channel line and if that holds then another rally phase to complete an A-B-C.  Obviously a break of the channel would indicate a test of the lower horizontal support, a break of which would herald that bear market.  The technical set up could also support a higher high and test of the upper channel line around 100 on DX.

I am waiting to see if the stocks wobble turns into something more sustained and as FX is unclear at present I will wait on the sidelines and see how things develop.  Besides the opportunity of a major stocks bear phase, if it triggers, is too rewarding to get distracted by other things...

[CharlotteIG]

FYI, 13:30 GMT: 

 

USD Average Hourly Earnings (YoY) (Jan)

Prev: 2.9%

Est: 3%

 

USD Labor Force Participation Rate (Jan)

Prev: 63.2%

Est: 63.1%

 

USD Average Hourly Earnings (MoM) (Jan)

Prev: 0.1%

Est: 0.3%%

 

USD Unemployment Rate (Jan)

Prev: 3.5%

Est: 3.5%

[CharlotteIG]

USD Nonfarm Payroll
Actual: 225K

USD Average Hourly Earnings (YoY) (Jan) 
Actual:3.1%

USD Labor Force Participation Rate (Jan) 
Actual: 63.4%

USD Average Hourly Earnings (MoM) (Jan) 
0.2%

USD Unemployment Rate (Jan) 
Actual:3.6%
 

[Mercury]

It seems to be all about the mighty dollar these days, well in truth when it is never?  Previously I though the USD may have topped out (DX) and be heading into a bear phase but recently, chiefly because the price action did not fit with a bear, I have switched to another leg up scenario.  I think we could see DX up at around 100, which would be another hit on the very solid upper channel line and the Fib 76/68 resistance zone.  After that, if USD turns down again, I see that bear phase coming into play for the medium term (6-9 months).  This scenario may do all sorts of weird and wonderful things for commodities, precious metals and indeed the wider economy, especially for emerging markets swamped in US denominated debt.  The so-called reflation trade could be back on for commodities once the USD bear hits in force but for now that seems to be suspended across all commodities.  A large USD Bear could also be a catalyst for PMs to get bullish again, with or without a wider global crisis scenario, but prior to that a bearish PM scenario persist in my analysis and macro fundamentals assessment; I just don't see where the catalyst for a large bull move on PMs is going to come from unless this virus thing gets out of hand and/or stock collapse, the latter of which seems unlikely short term but perhaps more likely medium term.  Therefore I am minded as follows:

1. USD up for the short term (couple of months time frame, maybe shorter)
2. Commodities down (definitely softs and things like copper may rally initially in relief fashion before falling to key support) - more on this later.
3. Oil however may buck the trend and rally because generally we need to see higher oil prices for a recession to kick in, based on past performance but again more on this later.
4. Stocks may get a bit whipsaw like for a while but generally will complete a melt up before an actual recession kicks in to drive the collapse that is surely inevitable.

So looking at DX charts I see the following:

On the Monthly chart USD was in a strong bear market since shortly after 9/11 and then turned on a long time frame Head & Shoulders, with the Head around 2009 when the Fed threw the kitchen sink at the Credit Crunch and kept on going with this policy, until around 2017 that is and the USD promptly dropped.  The rally was not a clear motive 1-5 though, more like a retrace in A-B-C form, which was stopped around the Fib 62% off ATHs in 2017.  The bear drop was in 1-5 and the current rally has been a staggered affair with lots of whip saw from about mid 2018.  The move since the 2017 turn down looks more like an A-B to me than anything else, which suggests that when the wave B completes we will see a fast bearish wave C.  However I think the bigger picture is a wave A up to 2017 and the current move is a large wave B, that could retest the H&S neckline, around he Fib 76/78 before the wheels come off the global wagon and there is a massive flight to the safety of the USD.

So short term Shorts on USD pairs but them go Long on appropriate turns for the medium term (6-9 months maybe) before it Long, Long, Long USD but by then I see Stocks collapsing and Gold/silver in that massive Bull market everyone is talking about.

Thoughts anyone?