The US dollar index ($DXY): The US dollar index completed a bullish key reversal during July, confirming a move to a major (long-term) uptrend. Given the main fundamental factor of the dollar is interest rates, the implication is the US Federal Open Market Committee could raise rates over the coming months. We’ll see. The Index closed October at 99.80, up 2.02 (2.1%) for the month. Heading into November the previous 4-month high remains at 100.26 from August. Theoretical Positions: Investors might’ve bought back previous short positions near the July close of 99.97. These shorts were established near the January 2025 close of 108.37 based on the completion of a bearish spike reversal.
The Euro (^EURUSD): The euro completed a bearish spike reversal during July, confirming a move to a major downtrend. However, monthly stochastics did not complete a bearish crossover above the overbought level of 80%, leaving the door open to a possible retracement rally over the coming months. This is also a characteristic of the spike reversal. The euro strengthened during August, and again during September, before falling again during October and closing 1.7% lower for the month. Theoretical Positions: Investors could’ve liquidated previous longs and gone short the euro near the July close of 1.1415 or higher. Additional sell stops could be placed below the previous 4-month low of 1.1392 from August. The euro closed October at 1.15374.
The euro/Canadian dollar (^EURCAD) completed another bearish spike reversal, again indicating the major trend has turned down. Recall it completed a similar pattern back in July before erasing the move during August. Theoretical Positions: Previous long positions would’ve been liquidated and new short positions established near the July settlement of 1.58165. Buy stops would’ve been triggered above the July high of 1.61301, resulting in a loss of 0.03136. It’s possible traders might’ve gone long near the August settlement of 1.60599. If so, these positions could be liquidated near the October settlement for a gain of 0.0106. If new short positions are established, buy stops would be above the October high of 1.64678.
The Canadian dollar (^CADUSD): Despite the lower monthly close the Canadian dollar remains in a major uptrend. The loonie turned long-term bullish at the end of February as it completed a bullish key reversal on its monthly chart. This also coincided with monthly stochastics establishing a bullish crossover below the oversold level of 20% meaning the loonie both signaled (stochastics) and confirmed (reversal pattern) the new major trend. Theoretical Positions: Investors would’ve bought back short Canadian dollar positions near the February settlement of 0.69125 and gone long at the same level. New buy orders could be placed near the downside target of 0.69991. The loonie closed October at 0.71373.
The Brazilian real (^BRLUSD): Despite the lower monthly close the real remains in a major uptrend. Theoretical Positions: Investors likely bought at the new 4-month high during March and April, putting the position at an average of roughly 0.17815. Additional positions might’ve been bought during June at the new 4-month high of 0.17876 raising the average long to approximately 0.17835. Sell stops would be below the previous 4-month low of 0.17762 (July 2025).
