Breakout Continues To Be Elusive For The Greenback

The US dollar has failed to break higher, and this seems to boost the chances that it experiences a near-term setback. Elsewhere we suggest that two dominant themes--US-China trade talks and Brexit--will likely be delayed. The combination of the technical condition and the macro backdrop may deter players from looking for a break out in the week ahead. A delay in Brexit is understood to be good for sterling because it ostensibly reduces the risk of a no-deal exit. An extension of the US-China tariff freeze is understood to mean a trade agreement is likely, but consequences for the dollar are not obvious. The significant currency agreement that was announced without a lick of specifics before the weekend does not mean China will accept a re-valuation of the yuan. Driving the yuan higher now would undermine efforts to stimulate the economy.  

Dollar Index: 

The Dollar Index eight-day rally ended on February 11. In the eight sessions since, it has risen twice. Initial support is seen in the 96.25-96.35 area, where last week's low, the halfway mark of this month's rally, and the 20-day moving average are found. It has not closed below this moving average since February 4. It may take a break of 96.00 to be convincing. The MACDs and Slow Stochastics favor the downside. 

Euro:

There have been a few exceptions, but $1.13-$1.15 range has contained most of the euro's movement for the past four months. The euro has been unable to rise through the mid-point of the range since February 6. Unless it does so in the coming days, it will post its second consecutive monthly decline. It finished January a touch below $1.1450. The technical indicators favor the upside after last week's 0.35% gain snapped a two-week slump. Three-month implied volatility is near 6.2%, the lowest in a couple of years. The 100-day moving average is near 7.2%. The low volatility may make options more attractive than forwards for some hedging or other strategies. 

1 2 3 4
View single page >> |

Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.