Strong Dollar Optics, Less Clear-Cut Details


The euro fell out of bed in the first half of February. It rose once above the previous session's high (February 13) by one-hundredth of a cent. It closed January a little below $1.11 and approached $1.0825 ahead of the weekend. The strength of the downside momentum is illustrated by the fact that it has closed underneath its lower Bollinger Band for the past three sessions. There is an old gap on the daily and weekly bar charts from the 2017 French elections (first round)that is found roughly between $1.0740 and $1.0820. The MACD is stretched but trending lower, while the Slow Stochastic appears to be trying to bottom. The $1.0900-$1.0925 area marks the nearby ceiling. 

Japanese Yen

Last week's range (~JPY109.55-JPY110.15) was the narrowest weekly range this year. The greenback is consolidating. After rising in the first three sessions last week, it slipped in the previous two to finish a little higher for the second consecutive week. The MACD and Slow Stochastic are tentatively rolling over though not from extended territory. Initial support for the dollar is seen near the JPY109.45-JPY109.50 area that houses a (38.2%) retracement of the month's gain and the 20-day moving average. Below there support is pegged in the JPY109.00-JPY109.20 band. 

British Pound

The increased possibility of a stimulative budget helped sterling recover back above $1.30 for the first time in five sessions on February 13, spurred by the naming of a new Chancellor of the Exchequer. Sterling rose in every session last week, something it has not done since April 2018. The MACD and Slow Stochastic look to be turning higher. A move above the $1.3085-$1.3100 area opens the door to retest the month's high near $1.3215, provided the $1.30-level holds. The euro lost 2.25% against sterling last week to trade below GBP0.8300 and is approaching last year's low (mid-December) near GBP0.8275. While the technical indicators suggest there is scope for additional near-term losses, it has closed below the lower Bollinger Band for the past two sessions (~GBP0.8325). 

Canadian Dollar

The US dollar began the week rising to new four-month highs near CAD1.3330. It fell about 0.5% in the next two sessions before consolidating in the last two. The greenback snapped a four-week advance by slipping about 0.4% against the Loonie. The 3.4% rally in oil prices and the nearly 1.7% advance of the CRB Index last week (the first weekly advance this year) coupled with the risk appetite reflected in rising equities seemed to help fuel the Canadian dollar's recovery. This is consistent with our reading of the charts. The technical studies suggest the greenback's pullback has just begun.Initial support has been encountered near CAD1.3235, and below there, in the CAD1.3215-CAD1.3220 area, the 20- and 200-day moving averages are found as is the (38.2%) retracement of the rally since January 22 low (~CAD1.3035). A break of these supports will boost our confidence that the US dollar may return toward CAD1.3100-CAD1.3150. 

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Read more by Marc on his site Marc to Market.

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

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