USDollar still mixed 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
92.73 (92.07)
Trend ↑ (↑) ↑ (↑) ↑ (↑ )
% Risk
Weight
12 (8) 79 (52) 90 (85)
Allocation 70% (70%)

$Index chart

 


Analysis

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.

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 risk 70% perpetual hedge on long forward dollar transaction exposures.


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

(Previous week in brackets)

EUR/USD Monthly Weekly Daily
1.1790 (1.1886)
Trend ↓ (↑) ↓ (↓) ↓ (↓)
% Risk
Weight
82 (62) 15 (28) 7 (6)
Allocation 70% (70%)

EURO/Dollar chart

 


EUR/USD Analysis

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.

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.


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

(Previous week in brackets)

GBP/USD (Cable) Monthly Weekly Daily
1.3769 (1.3889)
Trend ↓ (↑) ↓ (↓) ↑ (↑)
% Risk
Weight
90 (92) 62 (55) 15 (25)
Allocation 70% (50%)

GBP/USD chart

 


CABLE Analysis

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.

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.


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

(Previous week in brackets)

GBP/EUR Monthly Weekly Daily
1.1670 (1.1685)
Trend ↑ (↑) ↑ (↓) ↑ (↑)
% Risk
Weight
57 (60) 88 (87) 45 (70)
Allocation 80% (80%)

GBP/EUR chart

 


GBP/EUR Analysis

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.

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.

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

(Previous week in brackets)

USD/JPY Monthly Weekly Daily
109.50 (108.44)
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
46 (40) 93 (90) 72 (90)
Allocation 50% (50%)

USD/YEN chart

 


Analysis

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.

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.


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

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