USDollar close to intermediary bottom | 4 December 2020

covering USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR

USdollar Index Dollar Index Price Risk Analysis Forecast

(Previous week in brackets)

USD Index LT-M MT-W ST-D
90.80 (91.78)
Trend ↓ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
11 (13) 15 (24) 7 (8)
Allocation 70% (70%)

$Index chart


Analysis

4 December: This Index appears to be nearer an intermediate bottom. It is not finished even though daily risk has turned up. Finetuning can be done looking at hourly which is now at 80 and showing somew bearish divergence versus Daily. This should materialize on Monday Dec 7. As Weekly and Monthly have not finished the downtrend the next move could even be a substantially lower dollar or a dollar pause and upturn. We will be watching this to position accordingly. For now and going into the new week risk analysis demands staying with a 70% hedge on dollar receivables.

27 November: Monday Nov 30 is likely to confirm a swing up in the Monthly risk weight trend unless the dollar falls more sharply and close lower again. As weekly risk is building bullish divergence we will watch the dollar space carefully to action a temporary US dollar pause or trend change. Current support is at 88.00 which is another 4% and could easily happen and if it does or if a price pause becomes clear we will reduce our overall USD cover depending on cross currency. Euro still looks pretty strong with resistance in the 1.25 handle range which is also 4% out. No change for now.


EUR/USD FX live price, Weekly EURO vs US Dollar Price Risk Analysis Forecast

(Previous week in brackets)

EUR/USD LT-M MT-W ST-D
1.2118 (1.1960)
Trend ↑ (↓) ↑ (↑) ↓ (↑)
% Risk
Weight
86 (83) 75 (62) 92 (90)
Allocation 70% (70%)

EURO/Dollar chart


Eur/USD Analysis

4 December: Eur/USD quickly moved to 1.2177 before setlling a little lower at the 1.2118 close. As EUR is the primary cross in the $index one can expect the pictiure to be very similar and that is exactly the case. Hourly is showing bullish divergence versus Daily whilst Weekly and Monthly have not finished. It could bew tghe trigger for a rapidly weakening dollar or a dollar bottom being very close in time and/or price. We hold the current position and see what develops in the coming days.

27 November: A break of the recent 1.2010 high may trigger a rapid advance. With weekly in a relatively strong uptrned it is hard to predict a short term target of even an intermediate reversal pattern. Daily, now in overbought territory, could drop and restart upwards pushed by the Medium Term Weekly strength.A clean trun down of daily may therefore also trigger lightening the cover position to 40% temporarily. Close watch.


Cable GBP/USD FX live price, Weekly Sterling vs USDollar Price Risk Analysis Forecast

(Previous week in brackets)

GBP/USD (Cable) LT-M MT-W ST-D
1.3423 (1.3300)
Trend ↑ (↓) ↑ (↑) ↓ (↓)
% Risk
Weight
83 (79) 73 (63) 79 (85)
Allocation 50% (50%)

GBP/USD chart


CABLE Analysis

4 December: GBP definitely shows the weakest position versus USD, besides S/Yen of course. Cable is not convincing and looks to hesite its uptrend more than the other majors in the current dollar downtrend. It is however most prudent to remain 50% covered on dollar receivables.

27 November: The downturn in Daily risk is reason to lighten up on long dollar cover but Weekly is still pushing upward a narrowing of Daily and Weekly risk weight upon a slightly weaker Cable triggers removing some dollar cover and keep no more than 30% fwd dollar receivables hedged.


USD/JPY FX live price, Weekly USdollar vs Japanese Yen Price Risk Analysis Forecast

(Previous week in brackets)

USD/JPY LT-M MT-W ST-D
103.97 (104.04
Trend ↓ (↓) ↑ (↑) ↓ (↓)
% Risk
Weight
30 (33) 21 (22) 34 (40)
Allocation 50% (50%)

USD/YEN chart


Analysis

4 December: Just like GBP, the Japanese Yen is equally the weaker brother in this space. At least technically, which probably meets the fundamental economic status of both countries in the international arena. Hence we hold to a 50/50 balance of hedging trade exposures.

27 November: $/Yen is building bullish divergence in both Medium term and Long term risk weight. We stay with our neutral 50% hedge on fwd dollar receivables.


GBP/EUR FX live price, Weekly Sterling vs EURO Price Risk Analysis Forecast

(Previous week in brackets)

GBP/EUR LT-M MT-W ST-D
1.1061 (1.1116)
Trend ↑ (↓) ↓ (↑) ↑ (↓)
% Risk
Weight
37 (36) 69 (70) 20 (60)
Allocation 80% (80%)

GBP/EUR chart


GBP/EUR Analysis

4 December: GBP/EUR moved lower last week ending at 1.1061. Whilst Daily and Monthly risk look neutral, Weekly risk weight is uncomfortably high and turning down. This increases relative risk of this cross moving further down. GBP may benefit from MMT beliefs that sovereign countries managing their own currency allows for unlimited printing and spending without punishment. This theory is far from proven and certainly does not get any confirmation from the technical picture. We remain in the camp that seeks further weakness of GBP with a price objective of 90 on the GBP/EUR cross.

27 November: GBP was stronger than expected this past week yet closed on the lows. Price still looks vulnerable as per our long term forecast and we see no reason to change that outlook. It may be that markets feel safer with Sterling vis a vis Euro as the UK nears Brexit and MMT has reached a wider range of support for countries that still have their own currency like the UK. No change.

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Posted in A - All Financial Blogs | 2021 Forecast, FX - USD Index, EUR, GBP, YEN | EYEFORGOLD.

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