USDollar lower contrary to Goldman Sachs

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

(Previous update in brackets)

USD Index Monthly Weekly Daily
92.60 (92.73)
Trend ↑ (↑) ↑ (↑) ↓ (↑ )
% Risk
Weight
25 (12) 88 (79) 75 (90)
Allocation 70% (70%)

$Index chart

 


Analysis

5 April 2021: Last wek Goldman Sachs bank issued a change of heart turning 180 degrees on the direction of the USDollar against a basket of major world currencies. They may well know something we don't, but looking at our basic technical tools risk weight certainly has not yet produced the kind of signal to change our mind. The dollar index peaked in December 2016 at 1.0365, made an interim bottom in 2018 at 0.8825 and peaked again in March 2020 at 1.0300. The Index subsequently travelled south to 0.8920 without reaching a low risk extreme or bullish divergence in ANY of the short, medium and long term time scales. That is the simple fact driving a contrarian view. It is too easy to connect a dollar direction to rising interest rates. Interest rates go up because there are too many dollars expected to being borrowed. Institutions and Sovereigns are selling some long term treasuries. Real interest rates (Nominal market Rates minus Real Inflation) are NEGATIVE and that makes a dollar rise suspicious. Hence no change to maintaining the 70% overweight perpetual hedge of dollar receivables.

26 March 2021: The US currency managed to stage another minor rally with the Index closing at 92.72. Monthly risk weight turned up, now at 12%, but both Weekly and Daily are both developing divergence against Monthly timescale suggesting the current dollar correction to be just that. A correction. Chart objective could be as high as 94.00+ but risk weight remains in favor on the non US$ majors. 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
1.1798 (1.1790)
Trend ↓ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
75 (82) 10 (15) 22 (7)
Allocation 70% (70%)

EURO/Dollar chart

 


EUR/USD Analysis

5 April 2021: The Euro/USD chart looks very similar to the Dollar Index chart with technical analysis falling in line as a result. The correction of the Euro vs dollar looks to be just that; 'a correction' without having witnessed any kind of traditional or strategic bear signal. No Change.

26 March 2021: Euro has seen pressure against US$ in line with the general dollar trend. Again we notice developing strong divergence between short/medium and long term time scales. Hence risk developing against the dollar. In the Long term time frame which turned up the turn is base based on a simple first primary bottom, which typically means the dollar should be weaker longer term and first develop bullish divergence in most momentum tools before a primary bottom can be called. 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
1.3895 (1.3739)
Trend ↓ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
88 (90) 55 (62) 47 (15)
Allocation 70% (50%)

GBP/USD chart

 


CABLE Analysis

5 April 2021: GBP continued the stronger of the majors including US Dollar and the overall technical picture remains in favor of GBP vs USDollar. Monthly risk did turn down at high but not extreme levels without bearish divergence signal. Weekly in neutral risk range also down since the 1.42 handle peak in Febr. Daily risk is strongly poiting upward being drawn into its longer time scales. GBP has remained relatively stronger than expected but we feel confortable to maintain an overweight perpetual hedge on dollar receivables and vice versa.

26 March 2021: Cable still looks mixed and has been subject to more than usual speculative positioning based on post Brexit trading and Covid-19 news. As yet rather meaningless. However sterling's relative strength of late and following a slightly larger retracement the past 4 weeks, this is an opportunity to increase the dollar receivable hedge from 50 to 70% putting GBP/USD on a par hedge to Euro/USD.


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

(Previous week in brackets)

GBP/EUR Monthly Weekly Daily
1.1776 (1.1685)
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
72 (57) 93 (88) 85 (45)
Allocation 80% (80%)

GBP/EUR chart

 


GBP/EUR Analysis

5 April 2021: Even though this market has continued to advance against our long time forecast, the picture is beginning to change somewhat, in that we clearly see signals of topping action in Short and medium term time scales. Hedging is NOT speculation. It is managing relatively unacceptable risk. Depending on cost of goods sold within a given period with exchange rate movements that risk can only be manageable if the 4 percent overshoot of currency can be absorbed. That is where we are and the the current higher level will certainly doesn't give any signal to change our current view. On the contrary, so no change. Long term outlook remains sub par.

26 March 2021: GBP vs Euro has remained fairly strong and the chart still appears a little bullish short term. Longer term resistance is around 1.20 and the picture is still far from GBP favourable against what seems a solid uptrend. This picture, also looking at our tools could change quickly as we approach the upper band of this long term 1.10-1.20 trading range. This range still eyes for a finish well below the previous 1.0500 low, hence 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
110.08 (109.50)
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
62 (46) 93 (93) 82 (72)
Allocation 70% (50%)

USD/YEN chart

 


Analysis

5 April 2021: Dollat Yen at current level and based on high risk Short and Medium term time scales is falling in line with the general dollar picture. We are looking to increase the Yen payable and Dollar receivable hedge to 70% from 50%, but wait for the Monthly risk weight to close in and signal a potential reversal. The primary Dollar downtrend started in 2015 at 125.00, lost 25% and bounced off 100.00 in 2016 to reach 115.00 to then drop again into the 102.00 handle in Q4 2020. The most recent move could still travel to 112.00/113.00 but medium term is already very overbought. Agressive treasuries should now follow daily and increase immediately. Longer term operators could wait for a Medium term bearish divergence confirmation before doing so. This could be several weeks away.

26 March 2021: The risk trend is up in all time scales. This would typically develop further yen weakness. With weekly risk weight already above 90% the long term picture is mixed since Monthly only made a single regular bottom at 25% risk. We need to watch in coming weeks and the best approach is to maintain a 50% perpetual hedge either side of the transaction exposure.


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

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