Dollar idnex H4 ready to sell dont missed Trade setupDollar index H4 ready to sell don't missed Trade setup
Dollar-index
Further bearish bias is anticipated!... The broader Dollar and index trimmed earlier gains as news flow remained light but as the broader sentiment improved. A pullback in yields further put more pressure on the Buck with some seeing a bullish Treasury quant piece as one of the catalysts at the time.
Elsewhere, the data and speaker slate remained spared as eyes turn to the US May CPI on Thursday which also falls on ECB day, whilst Fed officials will refrain from making remarks on monetary policy as the blackout period is observed ahead of next week’s FOMC announcement.
Looking ahead, tomorrow sees another quiet session from a State-side perspective. Further bearish bias is anticipated.
Did you know about the U.S Dollar Index?We will talk a bit about an index that has existed for a long time, yet many traders do not know or use it. With this, we do not mean that it is 100% necessary, but it is good to consider certain situations. This post aims to give a theoretical development and then the technical vision of the graph in different temporalities.
🔸First of all, let's talk a little about what this index is:
The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.
The index is currently calculated by factoring in the exchange rates of six major world currencies, which include the Euro (EUR), Japanese yen (JPY), Canadian dollar (CAD), British pound (GBP), Swedish krona (SEK), and Swiss franc (CHF). The EUR is, by far, the largest component of the index, making up almost 58 percent (officially 57.6%) of the basket. The weights of the rest of the currencies in the index are JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).
🔸When was it created?
It started in March 1973, soon after the dismantling of the Bretton Woods system. At its start, the value of the U.S. Dollar Index was 100.000. It had since traded as high as 164.7200 in February 1985 and as low as 70.698 on March 16, 2008.
The make-up of the "basket" has been altered only once when the euro subsumed several European currencies at the start of 1999. Some commentators have said that the makeup of the "basket" is overdue for revision as China, Mexico, South Korea, and Brazil are major trading partners presently which are not part of the index, whereas Sweden and Switzerland are continuing as part of the index
🔸Why is it useful?
It’s an indication of the general performance of the US Dollar. This can be important not only in terms of technical analysis but fundamentally also. For example, movements in exchange rates of currencies impact the inflation rate and trade relationships of a county. Most policymakers, therefore, like to monitor the performance of their currency and take appropriate measures if/when needed.
The best way to see how strong or weak a particular currency is, is to use an index that shows the broad performance of that currency. The DXY is one such index, and for that matter, all currencies have an index that is monitored by the central bank and Government of that country.
Aside from the above, as the most important currency of the world, the US Dollar and its value can impact many other countries and the global economy. This is why the Dollar Index is the most important currency index and why so many versions of it have been created.
The USDX also has some known relationships with commodities like Gold and Oil. Generally, Dollar weakness is accompanied by rising commodity prices and vice versa.
🔸Now, let's go to the technical aspect of the chart:
In the monthly chart (published), we clearly see how the downtrend that was in force for more than 30 years was broken. This was a key event. The problem is that after this breakout, we did not see a continuation movement, and on the contrary, we have been on a consolidation process for more than six years.
We consider two potential scenarios that can happen based on the current movement. First, if we see a bullish break in the consolidation, it is very likely that we will see an upward momentum towards approximately 120.000, which is the closest supply zone that we see at this time.
For that to happen, we should see buying pressure, and that is not happening now. The price is close to the support zone and with a rather bearish behavior on the Weekly chart. We detail it below.
There was a breakout of the Ascending Trendline and its subsequent pullback, where it found supply again and resumed the fall. We are now close to the support zone.
Given this behavior and seeing the current bearish pressure, we believe that it is possible to see a breakout in that direction. Anyway, until that happens, we consider that it would not be safe to start a trade, as there is a possibility that the zone will not be broken.
If such a breakout happens, the next target is the support zone at 78.000-80.000.
Dollar remains bearish...The Dollar is mixed vs major counterparts, but maintaining recovery momentum after extending gains in wake of yesterday’s largely supportive US releases, and now looking at NFP as further validation or another fall from grace as the headline number disappoints again. The index made a firm break above 90.000 on Wednesday and is now losing strength. 89.00 is the next immediate downside for next week...
Dollar holding 90.00 for now...90.000 could well be unsustainable for the index short-term, but the Greenback has retested some psychological levels vs the Yen and Gold for example, around 109.00 and Usd 1900/oz respectively, as it attempts to stabilise again from todays session.
The latest recovery began with a bounce from 89.584 vs yesterday’s 89.533 base and continued after an early dovish salvo from ECB’s Panetta that thwarted the Euro’s latest effort to clear the 1.2250 mark convincingly.
In terms of US specifics, no taper talk or inflation boost for the Buck in the same vein as last Wednesday or the one before that, but Treasury yields offered a degree of underlying support, relatively speaking, ahead of Usd 26 bn 2 year FRN and USD 61 bn 5 year note supply. This could put pressure on the index for the remainder of the week. And I cant see it holding for long.
Back to the DXY, 90.023 has been printed thus far compared to Tuesday’s 89.867, and a ‘close’ above would be encouraging, for many traders looking at the majors near the highs.
The dollar set for more downside!The Dollar is slightly mixed against G10 currencies, but lagging vs precious and base metals, like Gold, after the latter partly due to strengthened forecasts of strike action at BHP’s Spence and Escondida mines in Chile after the rejection of a contract offer.
Conversely, spot bullion has taken advantage of softer US Treasury yields and a flatter curve that are keeping the Greenback capped in wake of last Friday’s disappointing retail sales data to breach a key technical level that was protecting Usd 1850/oz (200 DMA at Usd 1845.98), with bulls now eyeing another upside objective in the form of a declining trend-line that crosses the y axis around Usd 1858.40.
Back to the dollar, 90.500 in the index has not been reclaimed and 90.153 may offer some support ahead of 90.000 on any further pull-back through the prior session low (90.278) as this represents the midweek base outside of the 90.429-265 range thus far. Ahead, NY Fed manufacturing, NAHB and 3 Fed speakers including current FOMC voter Bostic twice.
Overall further downside is expected long-term for the index. 88.00 is a very modest target over the next coming weeks.
Will The Dollar Remain Bearish?The dollar index has been declining over the past few weeks and last week price went lower. This symbolized the bears have control. The question is, can they keep control?
If price retraces before continuing down, price could retrace back to $91.17. If it does, and proves it can stay below, price could potentially continue to decline back to the low causing the base dollar currency pairs to continue moving down and the quote currency pairs to continue moving upwards.
S&P500 - Short IdeaJust listening to the candles on this one, price is struggling to make new highs, now several daily candles are confirming weakness, this is still insane QE, the wheels should fall off at some point.. see the setup take the setup. it's how this game works,
If you reflect to my OIL/WTI short last week
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50/50 win rate and I made .8% on these two trades. Manage Risk, asymmetrical risk/reward and just keep taking high quality setups.
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Only one day left for the Dollar to avoid any residual month...Only one day left for the Dollar to avoid any residual month end selling, and so far its holding above support as it continues to counter bearish rebalancing signals and the ongoing dovish overtones imparted by the Fed with some assistance from a back-up in yields and curve re-steepening.
However, the Buck is also benefiting at the expense of others and a degree of consolidation or corrective price action approaching the end of a 4th successive week of depreciation. Looking at the DXY as a proxy, a marginal new recovery high from sub-90.500 lows in the index was forged at 90.815 after the Euro filled remaining bids in to 1.2100 and tripped a layer of stops on the back of weaker than forecast prelim.
However, EUR/USD has found a base nearby and 2.1 bn option expiries at the round number could be keeping the headline pair underpinned alongside bids in the EUR/GBP cross around 0.8700 that may be due to RHS fix and/or month end demand.
Accordingly, Sterling is facing a task to retain grip of 1.3900 vs the Buck after topping out below yesterday’s 1.3975+ peak and failing to breach a double top against the Euro circa 0.8674, irrespective of Pound positives in the form of a super strong Nationwide UK house price survey and upbeat Lloyds business barometer.
The Buck trying hard to maintain momentum... The Dollar index briefly climbed above the 91.000 level that was proving elusive after a narrow miss at 90.989 on Monday, but whether it can sustain gains above and the close higher remains to be seen given chart resistance in the form of the DMA and 21 WMA at 91.025 and 91.070 respectively vs a 91.072 peak thus far. Overall downside projections are relatively strong.
However, the Greenback continues to outpace low yielders and perhaps more encouragingly has also clawed back some lost ground against high beta, commodity and cyclical currencies that started the week so well.
Moreover, the Buck is holding up well considering impending month end rebalancing flows that are unusually negative for April, according to Citi’s hedging model with a 1.7 SD seen only 5% of the time since 2004. Ahead, US consumer confidence and the 7 year note auction after somewhat mixed 2 and 5 year results yesterday could keep Treasury yields on a firmer footing before attention reverts to the FOMC tomorrow.
The Dollar index has extended declines across the board...The Dollar index has extended declines across the board as US Treasury yields maintaining a mild bull-flattening bias from prior outlooks, but also on increasingly bearish technical momentum as several Buck/major pairings breach key and psychological levels and the DXY itself breaches 91.500 to probe support around 91.300 within a 91.748-125 band.
However, the index and Greenback in general may benefit from underlying bids into 91.000 given that large technical factors are pointing proximity at 91.019 today.
I expect some immediate further decline.
But overall will be keeping close eye on the next couple of days for longer term bias.
A somewhat choppy start to the week for the dollar...A somewhat choppy start to the week for the more extensive Dollar and Index, in a relatively contained range with upside conviction as the European entrance saw new sessions highs with the intraday band currently at 92.331-172, ahead of its 18 DMA at 92.389.
The weekend saw remarks from Fed Chair Powell, who stuck to his guns with emphasis on the labour market, whilst noting the economy is recovering better than he had expected, but virus flare-ups remain a significant risk.
On that note, it is worth keeping on the radar the White House semiconductor summit slated for today (time TBC), as around 20 heavy-cap companies convene to discuss the chip shortage and its knock-on effect on auto production and subsequently jobs.
From a fiscal standpoint, reports suggest US President Biden aims to complete the infrastructure program by the summer and is open to cooperate on the structure of the spending plan – although the proposal drew for Republicans last week. Key risk events for the European session remain on the lighter side, although the state-side Note auctions (3s, 10s) may garner attention.
Looking ahead, the week is abundant with risk events, including US inflation, Fed speaks, and the official start of US earnings season, which could induce some sentiment-driven Dollar flows.
Indeed, the index has rebounded from Thursday’s 91.995 low...Prior chart:
Nothing new from Fed chair Powell to augment FOMC minutes or fresh catalyst for a rebound in US Treasury yields amidst relatively mild re-steepening, but enough it seems for the Dollar to regain some composure as the week draws to a close.
Indeed, the index has rebounded from Thursday’s 91.995 low to probe above 92.300, with the ripples reaching all DXY components and spreading beyond to other Greenback counterparts as several psychological and key technical levels are being breached or rigorously tested.
However, the Buck still has a long way to go before getting back on track, and the nearest hurdles come in the form of 200 and 21 DMAs at 92.330 and 92.363, then recent highs and 92.500 before the index even considers staging an attempt to revisit Monday’s 93.000+ peak.
Turning to fundamentals, PPI data is due and could provide a guide for CPI next week.
DXY - To early to predict?The Dollar index is very complicated to understand and predict when you analyses the individual factors that play into the various parts and therefore the index as a whole.
The consensus if for the Dollar to weaken and there's great arguments to support this widely held theory.
58% of the Dollar index consists of the Euro. It's therefore important to try to understand the Euro and Eurozone macro economics. The Eurozone appears to be deflationary, at least against that of the US. US inflation is bound to spike at some point, leaving the inflation differential between the US and the Eurozone at a meaningful figure. According to Alpine Macro, a deflationary environment doesn't lead to a weakening of the respective currency despite a poor economic back drop. A deflationary environment leads to an appreciation in the currency which is deflationary against its inflationary trading partners. Could this all lead to a weakening of the dollar index.
But what about the contrarian view? I'm trying to wrap my head around the factors which could lead to a strengthening in the dollar.
Trading signals
The trading signals suggest that the dollar should weaken or retrace, perhaps towards the 97 mark on the weakly chart which has been indexed to 100. Thereafter, perhaps a strengthening trend could follow? The inverse relationship between the dollar and the Euro is clearly evident in the chart. If this trend were to follow through, the dollar index could reach levels around the 95 - 97 mark.
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It remains to be seen whether the final throes of March...Prior chart:
It remains to be seen whether the final throes of March, Q1 and FY 2020/21 give bulls more incentive to try and breach barriers that have held firm earlier, bears continue to reassert control and the Buck ends its winning streak. DXY slipped to a marginal new session low just under 93.000 in wake of US pending home sales plummeting around 4 times as much as expected.
Prior NFP data:
New York lawmakers reportedly are near a budget deal which will boost income and corporate taxes by USD 4.3bln. (WSJ)
US Non-Farm Payrolls (Mar) 916k vs. Exp. 647.0k (Prev. 379.0k, Rev. 468k); two-month net revisions +156k (prev. +38k)
US Unemployment Rate (Mar) 6.0% vs. Exp. 6.0% (Prev. 6.2%)
US Average Earnings (Mar) Y/Y 4.2% vs. Exp. 4.5% (Prev. 5.3%, Rev. 5.2%)
Looking at the DXY, 93.500 has held (just)...Prior chart:
The Dollar’s almost relentless rally on the crest of rising US Treasury yields and curve steepening among other bullish factors stalled at the end of March when it failed to breach a few psychological barriers that remain beyond reach as the new month, quarter and financial year kicks off. It also reached a turning point on the Fibonacci D extension that we called earlier this week in the chart above.
However, this could be a temporary pause in the overall trend pending NFP that is due for release on Good Friday amidst expectations of a blockbuster report from the BLS, and given the fact that currency markets will be left alone to respond in the absence of others at the start of a long holiday weekend.
Looking at the DXY, 93.500 has held (just) within a 93.439-92.716 range, while the benchmark 10 year cash yield topped out at a new cycle high circa 1.776% on Tuesday in tandem with the index.
DXY Time To FallWe have seen a big growth on dollar index for the last few weeks. In Weekly time frame, there is a downtrend which is in the correction phase. Price has approached to the supply zone and has retraced more than 50% of the downside move. There is also a negative hidden divergence between MACD and price peaks. In Daily chart, price has approached to the two resistance levels. There is a negative regular divergence between MACD and price peaks. As you see, although price has made a higher high, MACD made a lower high which means the downside pressure is coming soon. I expect a rejection from the resistance levels and a downside push around the marked areas. What do you think about US dollar?
A typical mundane Monday for the Dollar...A typical mundane Monday for the Dollar and frustrating for both bulls and bears that might have been looking for more given that month end looms and Wednesday. Indeed, buyers were squeezed only a fraction short of 93.000 in DXY terms, but sellers did not get much mileage either as the index found a base at 91.71 and the Dollar attempted to break out of ranges in wake of an upbeat Dallas Fed manufacturing business survey. 93.30 is the anticipated rebound zone for the index and be careful of a sharp pullback from this price.
PMI beats have helped the Euro retain hold of the 1.1800 handle.PMI beats have helped the Euro retain hold of the 1.1800 handle against the Buck. Possible movements down into 1.17090 are now likely,. The Dollar remains upwardly mobile amidst deteriorating risk sentiment on latest waves of the coronavirus that are forcing many countries to roll-back reopening plans and some to re-enter lockdown or tighten restrictions. However, the DXY has encountered some resistance in chart terms beyond 92.500 and its prior 2021 peak around the 200 DMA (92.604) alongside resilience in the Euro and Pound belatedly following significantly better than expected preliminary PMIs from France, Germany, the bloc as a whole and UK even though the EZ readings could all be downgraded in the final reckoning given fresh pandemic outbreaks since the cut-off point for compiling the flash surveys. Hence, the index has drifted down from best levels within a 92.608-338 band awaiting US durable goods data and Markit’s initial March PMIs before another bunch of Fed speakers and a double helping of supply.
