Currency update | USDollar possibly building intermediary low | 27 November 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 | |||
|---|---|---|---|---|---|---|
| 91.78 (92.71) | ||||||
| Trend | ↑ (↓) | ↓ (↓) | ↓ (↓) | |||
| % Risk Weight |
13 (14) | 24 (33) | 8 (32) | |||
| Allocation | 70% (70%) | |||||
$Index chart
Analysis
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.
16 November: The US dollar against majors rallied last week on the Pfizer vaccin news and fell slightly into this week's opening. On today's Moderna vaccin announcement markets responded very similar to last week but the dollar has not rallied to the same extend. Daily risk turned down again and Weekly risk trend turned down from up. This price chart consolidation between 92 and 94.5 actually makes the dollar look more vulnberable technically in spite of a Monthly low risk uptrend. We stay largely covered with 70% on long dollar exposures. No Change.
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 | |||
|---|---|---|---|---|---|---|
| 1.1960 (1.1826) | ||||||
| Trend | ↓ (↓) | ↑ (↑) | ↑ (↑) | |||
| % Risk Weight |
83 (82) | 62 (53) | 90 (66) | |||
| Allocation | 70% (70%) | |||||
EURO/Dollar chart
Analysis
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.
16 November: Euro/USD shows the same leading picture and the dollar index. Weekly turning up with daily up against an only mild overbought Monthly that is in a downtrend. The consolidation range between 1.16 and 1.19 therefore looks good for Euro in the medium term, i.e towards the end of the year at least. No Change.
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 | |||
|---|---|---|---|---|---|---|
| 1.3300 (1.3186) | ||||||
| Trend | ↓ (↓) | ↑ (↑) | ↓ (↓) | |||
| % Risk Weight |
79 (76) | 63 (55) | 85 (68) | |||
| Allocation | 50% (50%) | |||||
GBP/USD chart
Analysis
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.
16 November: During the past 6 months GBP has not managed to climb above the dec 2019 1.35 high whilst risk weight actually moved to higher high with a lower price high. This alsdo indicates a mild bearish divergence and indicates a relatively weaker GBP in the major currency space. No change to the lower long dollar exposure cover at 50%.
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 (104.57) | ||||||
| Trend | ↓ (↓) | ↑ (↑) | ↓ (↓) | |||
| % Risk Weight |
33 (35) | 22 (21) | 40 (65) | |||
| Allocation | 50% (50%) | |||||
USD/YEN chart
Analysis
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.
16 November: Similar to GBP, Yen looks weaker in the major currency space and still appears to be building a bottom at the nearer par levels. No Change.
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 | |||
|---|---|---|---|---|---|---|
| 1.1116 (1.1143) | ||||||
| Trend | ↓ (↓) | ↑ (↑) | ↓ (↓) | |||
| % Risk Weight |
36 (37) | 70 (62) | 60 (51) | |||
| Allocation | 80% (80%) | |||||
GBP/EUR chart
Analysis
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.
16 November: We still call this cross to reach 0.90 long term. Present behavior is speculative whilst the technical picture appears to support fundamental long term weakness of the UK economy. No change maintaining a perpetual cover on long GBP transaction exposures.