Monthly Analysis: Currencies

2023-03-01T06:40:55-06:00March 1st, 2023|Monthly|

The US dollar index ($DXY) remains in a major (long-term) downtrend on its monthly chart. The secondary (intermediate-term) uptrend on the weekly chart looks to be Wave B (second wave) of the major 3-wave pattern. The secondary upside target is between 106.15 and 107.80 with a possible extension to 109.45. Theoretical Positions: Traders may have shorted the dollar near the September and October closes of 112.00. New or additional sales could be made when Wave B establishes a topping pattern.

The euro (^EURUSD) remains in a major uptrend. However, it did complete a bearish spike reversal during February indicating Wave 1 has topped out and Wave 2 has begun. This is confirmed by the secondary downtrend on the euro’s weekly chart with a target area between 1.04611 and 1.02845, with a possible extension to 1.01079. Theoretical Positions: Traders could be long the euro from the September close of 0.98024 based on a bullish crossover by monthly stochastics at the end of that month. Additional longs might’ve been established in November when the euro moved to a new 4-month high. Longs could be added on a Wave 2 selloff.

The euro/Canadian dollar (^EURCAD) consolidated last month before close fractionally lower at 1.44329. What’s interesting about this spread is monthly stochastics are sharply overbought indicating it could be nearing a major top. Theoretical Positions: Traders could be long from the August close of 1.31904. Additional longs might’ve been established with the new 4-month high beyond 1.36955 during November. This puts the average long near 1.3443. Traders will be careful with these long positions given the bearish spike reversal posted during January. Stops could be placed below the January low of 1.4236.

The Canadian dollar (^CADUSD) remains in a major uptrend on its monthly chart. The secondary downtrend, Wave 2 of the major 4-wave pattern, is expected to take out the low of 0.72967 over the coming weeks. Theoretical Positions: Traders could be long from the October close of 0.73395 with a stop below the October low of 0.71550.

The Brazilian real (^BRLUSD) took out its previous 4-month high of 0.19905 before closing back below that mark for the month. Theoretical Positions: Traders might be selling options to take advantage of the range between July low of 0.18131 and August high of 0.19949. Otherwise, new positions will depend on a breakout of either side of the range.

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