USDollar shows mixed fx signals

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

US Dollar Index Price Risk Analysis Forecast 2021

(Previous update in brackets)

USD Index Monthly Weekly Daily
92.07 (90.93)
Trend ↑ (↑) ↑ (↓ ) ↑ (↑ )
% Risk
Weight
8 (8) 52 (45) 85 (35)
Allocation 70% (50%)

$Index chart

 


Analysis

9 March 2021: The US dollar rallied against all majors all of last week and into this morning before taking a breather. Not a huge move at just over 1% but, in its own right, significant enough to wonder if our forecast requires serious review. As Weekly risk weight had turned down from a divergence position versus Long term, last week's move reversed the picture like a turn on a dime. What we see is that short term risk weight has already rushed up into high risk range whilst weekly is following more slowly. This tells us that both Short and Medium term risk are on a divergence path vis a vis Monthly risk weight. It means dollar risk is for it to come down again. Trend is up on mixed economic signals, which we have witnessed many times before over the past 40 years whilst risk is getting high(er). How far this correction, in our opinion, will move is hard to say. The ABC already present may have run its course or could drive the buck higher into the October 2020 consolidation range of 92.50 -94.50. We see no reason to change our technical concern around the still high value of the dollar versus the other major currencies and stick with a low rtisk 70% perpetual hedge on long forward dollar transaction exposures.

26 February 2021: The strong reversal on Thursday evening after reaching a low of 89.60 the Index continued upward on Friday pushing hourly risk weight into a high risk zone whilst medium term weekly is still pointing down. Daily risk is up from initially reaching a lower risk weight level on Thursday. The $Index rallied more sharply following a relatively weak move in Cable and Yen. We remain very much on the defense regarding USDollar. Mixed short term reactions are generally just temporary although this may last a little while longer. No Change.


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

(Previous week in brackets)

EUR/USD Monthly Weekly Daily
1.1886 (1.2068)
Trend ↑ (↑) ↓ (↓) ↓ (↓)
% Risk
Weight
62 (74) 28 (57) 6 (68)
Allocation 70% (50%)

EURO/Dollar chart

 


EUR/USD Analysis

9 March 2021: The Euro, being the primary contributor to the dollar Index, shows a very similar pattern althoug Monthly risk weight has turned down at a more neutral risk level. We believe the Primary dollar trend is down and we yet need to see a to be expected Long term risk weight bearish divergence from a much higher risk level in order to call a Euro top. All these big movements wee see in Oil, Crypto and Interest rates weigh heavily on short term sentiment which currently favors the dollar, but in the very long term we'd be eyeing EUR/USD closer to 1.5000. No Change.

26 February 2021: Euro/USD reacted only mild to the broader dollar move. The Long term $ downtrend which started in 2016 with as first major reaction low in March 2020 is far from finished. As we believe the objective technical observation to justify a major trend change, we need yet to see a proper peaking indicator that the time for a major trend change has come. This may be years from now. No Change.


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

(Previous week in brackets)

GBP/USD (Cable) Monthly Weekly Daily
1.3889 (1.3908)
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
92 (94) 55 (78) 25 (55)
Allocation 50% (30%)

GBP/USD chart

 


CABLE Analysis

9 March 2021: We still maintain a much more cautious approach to Cable, where GBP continued relative strenght against the backdrop of a volatile London fx market. The price extension 2 weeks ago into the 1.4200 handle could even be a blow off top although we also maintain a milder approach to a weaker dollar and stay with our 50% hedge on long fwd dollar risk. The technical picture for GBP/USD looks more heavy and could, if the dollar maintains relative strenght in coming weeks, turn cable down more rapidly. For now, there is some short term risk weight divergence versus Long term.

26 February 2021: Cable had a brief blow off top at 1.4240 on Wednesday reversing quickly and closing the week at 1.3908. Although Sterlings technical picture looks weakish short term, we feel that a perpetual 50% cover on forward dollar transaction long exposures is still the lowest risk approach. No Change.


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

(Previous week in brackets)

GBP/EUR Monthly Weekly Daily
1.1685 (1.1505)
Trend ↑ (↑) ↓ (↑) ↑ (↓)
% Risk
Weight
60 (75) 87 (89) 76 (55)
Allocation 80% (80%)

GBP/EUR chart

 


GBP/EUR Analysis

9 March 2021: Sterling maintained its strenght during the week and closing March 9 at 1.1665. We have been more cautious and bearish on Sterling due to high risk technical positions, but as markets force themselves higher these technical indicators will be replaced with fresh direction. The problem we see is that both daily and weekly risk weight are into bearish divergence (lower risk to higher price) positions, whilst Monthly is now in a strong uptrend again. That Monthly risk weight uptrend could prove leading but the risk shorter term remains high. We prefer to remain cautious and keep the 80% perpetual cover on GBP receivables. This may result in opportunity loss and we know that this market in particular can change direction very quickly. No Change

26 February 2021: GBP/EUR of course has a similar blow off top on Wednesday at 1.1710 before finishing the trading week a little lower than previous weeek at 1.1505.Medium and Long term risk weight trends are still up but highly suspect. Technicals still do not confirm the stronger GBP action of the past few weeks. We remain b earish on GBP and pursue no change to majority cover (80%) on long GBP transaction exposures. Higher Gilt yields and possibly higher vaccination rates in the UK were the drivers of the recent higher Sterling levels, but the underlying picture, both technical and fundamental is more suspect of flowing into the inflationary direction witnessed 30-40 years ago. No Change.

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

(Previous week in brackets)

USD/JPY Monthly Weekly Daily
108.44 (106.47)
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
40 (36) 90 (73) 90 (85)
Allocation 50% (50%)

USD/YEN chart

 


Analysis

9 March 2021: Dollar Yen finally crept up with the general dollar trend. Daily and Weekly risk weight are in the high risk zone (90+%) whilst Monthly is in a solid uptrend but at just 40%. This is a potential divergence between short and long which we should watch carefully before making an attempt to change the risk position from our 50% perpetual long dollar cover.

26 February 2021: This week the Yen broke a recent trend and followed the other major currencies against the US Dollar finishing at the highest level since August 2020. Dollar/Yen is still below its 50 year downtrend. It fell from 280.00 to 120.00 during the 1980's and has pivoted around the current level since 1990. The long term trend appears to still push the Yen down which kind of confirms that long term Japanese currency peak at 76.00 back in 2011, coinsiding roughly with the Gold price peaking at that time. The bigger picture is that Japan is no longer that master technology player it was during the latter half of the previous century. Looking at the long term chart we could see $/Yen staying roughly in position of even rally whilst the dollar broadly weakens. This essentially means that short Yen transaction exposures against most major currencies can remain largely unhedged for the next several years.


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

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