Monthly Analysis: Currencies

2023-08-01T10:16:02-05:00August 1st, 2023|Monthly|

The US dollar index ($DXY) remains in a major (long-term) downtrend on its monthly chart with a downside target near 99.00. The USDX posted a low of 99.58 during July before rallying to close at 101.86. Monthly stochaatics were partially below the oversold level of 20%, setting the stage for a bullish crossover during the months ahead. Theoretical Positions: Traders may have shorted the dollar near the September and October closes of 112.00. Buy stops would be above the previous 4-month high of 104.70.

The euro (^EURUSD) remains in a major uptrend with the next upside target near 1.12746. However, the euro was looking top heavy as July came to an end, hitting a monthly high of 1.12754 and closing at 1.09969. Theoretical Positions: Traders could be long the euro from the September 2022 close of 0.98024 based on a bullish crossover by monthly stochastics at the end of that month. Additional longs might’ve been established during November 2022 when the euro moved to a new 4-month high. Sell stops are below the previous 4-month low of 1.06354.

The euro/Canadian dollar (^EURCAD) remains in a major downtrend after completing a bearish 2-month reversal at the end of May. The rally seen during July looks to be Wave B (second wave) of the 3-wave downtrend pattern. This could give traders an opportunity to short the spread, possible during the July spike or a rally back to between 1.4700 and 1.48. The downside target area is between 1.45278 and 1.37302. Theoretical Positions: Traders could liquidate longs from the August 2022 close of 1.31904 near the May 2023 close of 1.45107 (a gain of 0.13203) and establish new short positions (short euro/long Canadian dollar). If so, then stops would be placed above the 4-month high of 1.51118 from April 2023.

The Canadian dollar (^CADUSD) remains in a major uptrend on its monthly chart, extending the move to a high of 0.76378 during July. The initial upside target area is between 0.76027 and 0.77410. Theoretical Positions: Traders could be long from the October 2022 close of 0.73395. Additional longs could be established near the March settlement of 0.73975, putting the average long near 0.73685. Also, additional longs may have been established during June a the loonie took out its previous 4-month high of 0.75398. If so, the average long position would now be 0.74256. Sells stops would be below the previous 4-month low of 0.73238 from May.

The Brazilian real (^BRLUSD) moved into a major uptrend during June as it took out its previous 4-month high of 0.20466.The upside target is the April 2022 high of 0.21773. Theoretical Positions: New long positions were established when the real took out its previous high of 0.20214 from February, with additional longs established as the real took out the May high during June. This puts the average position at roughly 0.20346. Sell stops would be placed below the previous 4-month low of 0.19535 from May 2023.

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