USDollar ends mixed in short Christmas week | 24 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
90.22 (89.92)
Trend ↓ (↓) ↑ (↓) ↓ (↓)
% Risk
Weight
11 (11) 8 (8) 39 (6)
Allocation 70% (70%)

$Index chart


Analysis

24 December: As Daily risk is already moving into potential bearish divergence versus weekly and Monthly, the short Christmas week does not give enough weight ammunition to argue the uptrend in weekly risk. Weekly risk is not yet showing bullish divergence either. With Monthly risk still in an interim downtrend this must be considered the leading USD trend indicator with potentially many more months of dollar weakness in store. No Change.

18 December: Covering currency exposure, besides speculation is not a short term activity, but should be addressed with caution as and when necessary. During the past 2 weeks the dollar lost another 1% and is still in a downtrend in all time scales even though our technical tools are in search for a near term bottom. As long as the very short elastic scale keeps diverging from their next higher time scale, the weaker dollar trend is not yet finished. We stay on 70% dollar receivables hedge which may practically be the same as a 100% hedge given the uncertain forward looking world economic conditions.


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
1.2197 (1.2240)
Trend ↑ (↑) ↑ (↑) ↓ (↑)
% Risk
Weight
86 (87) 90 (88) 64 (93)
Allocation 70% (70%)

EURO/Dollar chart


EUR/USD Analysis

24 December: EUR/USD logically shows a similar pattern as the USD index being the largest Dollar index contributor. Daily risk already reversed fairly sharp from the overbought condition one week earlier. Breaking the 2017 1.2555 high is a matter of time. We are not reducing the (perpetual) 70% hedge on dollar receivables.

18 December: Hourly pressure keeps holding the dollar in a downward spiral and Euro up. This market appears close to an intermediate dollar bottom but has not yet reached that clear turning point. Going into Christmas this may change but we'd be looking for a minimum 50% hedge, from 70%, on dollar receivables.


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
1.3562 (1.3494)
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
84 (83) 78 (77) 78 (82)
Allocation 50% (50%)

GBP/USD chart


CABLE Analysis

24 December: GBP is still looking the weakest major fiat in the index. It is finally breaking an 11 year long term Monthly downtrend versus USDollar, but nothing spectecular, hence a solid 50% perpetual hedge on dollar receivables.

18 December: As Brexit nears completion, the jitters, of 'maybe deal' or 'no deal' can be felt in financial markets. It is very speculative and right now GBP, together with Dollar Yen, still looks a weaker brother in the currency space. Hence staying with a lower 50% hedge on dollar receivables, awaiting further news during the coming week. 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
1.1120 (1.1000)
Trend ↑ (↓) ↓ (↓) ↑ (↑)
% Risk
Weight
38 (37) 44 (47) 80 (56)
Allocation 80% (80%)

GBP/EUR chart


GBP/EUR Analysis

24 December: The near 100% chance of filling the gap open at 1.0890 on Dec 14 was filled one week later bottoming at 1.0850 and rallying to a 1.1170 high following the Brexit deal announcement. Traditionally Sterling is a speculative currency b ut it has lost much of its shine in international trade. The effect of the Brexit trade terms look extremely unclear and GBP fundamentally looks vulnerable. Even though the interim Monthly risk weight trend turned slightly up, the strong advance of daily risk is a reason for concern of a weaker pound versus Euro. The risk picture of this GBP/EURO currency cross warrants an above average hedge on Sterling receivables. No Change.

18 December: Brexit and Vaccin dominated trading in Sterling the past few weeks. GBP/EUR traded within a 2% range the past 2 weeks ending marginally lower on Friday Dec 18. One important observation is that GBP gapped open on 14 Dec and that gap is yet to be filled. There is near 100% historic chance this will happen. The gap is at 1.0890 or 1% lower. The 1.0800 handle will be critical to hold in order to consider lightening up on our 80% GBP receivable hedge. If there is a trade deal with Europe before year end, GBP is likely to rally sharply. We predict that such a rally will be present an opportunity to cover new GBP receivable exposures. GBP continues to show as the weaker currency for now. No Change to cover 80% long GBP exposures.

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
103.60 (103.20)
Trend ↓ (↓) ↓ (↓) ↑ (↓)
% Risk
Weight
29 (28) 19 (20) 39 (16)
Allocation 50% (50%)

USD/YEN chart


Analysis

24 December: So far this year Yen has lacked the performance againbst USDollar as seen with other majors currencies and the technical picture is also indesicive.Dollar/Yen feels more like bottoming action than anything else. The risk of Dollar/Yen finally catching up on its lagging performance appears low. No Change.

18 December: Some analysts predict a major move down in $/Yen, which has clear lagged behind other majors against the USD. From a technical perspective we cannot share that view. Yen continues to look weak in the currency space is can be exp3cted to follow the dollar in up and down trends. We limit currency risk to a 50% hedge on yen payables for transaction exposures in most other major economies.


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

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