USDollar weakness continues | 18 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
89.92 (90.80)
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
11 (11) 8 (15) 6 (6)
Allocation 70% (70%)

$Index chart


Analysis

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.

4 December: This Index appears to be nearer an intermediate bottom. It is not finished even though daily risk has turned up. Finetuning can be done looking at hourly which is now at 80 and showing somew bearish divergence versus Daily. This should materialize on Monday Dec 7. As Weekly and Monthly have not finished the downtrend the next move could even be a substantially lower dollar or a dollar pause and upturn. We will be watching this to position accordingly. For now and going into the new week risk analysis demands staying with a 70% hedge on dollar receivables.


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
1.2240 (1.2118)
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
87 (86) 88 (75) 93 (92)
Allocation 70% (70%)

EURO/Dollar chart


EUR/USD Analysis

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.

4 December: Eur/USD quickly moved to 1.2177 before setlling a little lower at the 1.2118 close. As EUR is the primary cross in the $index one can expect the pictiure to be very similar and that is exactly the case. Hourly is showing bullish divergence versus Daily whilst Weekly and Monthly have not finished. It could bew tghe trigger for a rapidly weakening dollar or a dollar bottom being very close in time and/or price. We hold the current position and see what develops in the coming days.


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
1.3494 (1.3423)
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
83 (83) 77 (73) 82 (79)
Allocation 50% (50%)

GBP/USD chart


CABLE Analysis

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.

4 December: GBP definitely shows the weakest position versus USD, besides S/Yen of course. Cable is not convincing and looks to hesite its uptrend more than the other majors in the current dollar downtrend. It is however most prudent to remain 50% covered on dollar receivables.


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
103.20 (103.97)
Trend ↓ (↓) ↓ (↑) ↓ (↓)
% Risk
Weight
28 (30) 20 (21) 16 (34)
Allocation 50% (50%)

USD/YEN chart


Analysis

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.

4 December: Just like GBP, the Japanese Yen is equally the weaker brother in this space. At least technically, which probably meets the fundamental economic status of both countries in the international arena. Hence we hold to a 50/50 balance of hedging trade exposures.


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
1.1000 (1.1061)
Trend ↓ (↑) ↓ (↓) ↑ (↑)
% Risk
Weight
37 (37) 47 (69) 56 (20)
Allocation 80% (80%)

GBP/EUR chart


GBP/EUR Analysis

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.

4 December: GBP/EUR moved lower last week ending at 1.1061. Whilst Daily and Monthly risk look neutral, Weekly risk weight is uncomfortably high and turning down. This increases relative risk of this cross moving further down. GBP may benefit from MMT beliefs that sovereign countries managing their own currency allows for unlimited printing and spending without punishment. This theory is far from proven and certainly does not get any confirmation from the technical picture. We remain in the camp that seeks further weakness of GBP with a price objective of 90 on the GBP/EUR cross.

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

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