Monthly Analysis: Currencies

2023-09-04T09:17:02-05:00September 4th, 2023|Monthly|

The US dollar index ($DXY): I’m going to call this a major (long-term) sideways trend for now, something that looks to have become a familiar theme at the end of August. The range heading into September was between the previous 4-month high of 104.70 (May 2023) and 4-month low of 99.58 (July 2023). The Fed fund futures forward curve continues to show another hike by the US Federal Open Market Committee is likely at the September meeting. If so, this could be the catalyst to push the $DXY beyond its previous 4-month high. 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): I’ll call the major trend sideways as well, though still looking like it is in the process of rolling over into a downtrend. Initial support is at the previous 4-month low of 1.06354. 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. The downside target area is between 1.45278 and 1.37302. Theoretical Positions: Traders could be short the spread near 1.48, with a stop above the April high of 1.51128.

The Canadian dollar (^CADUSD) remains in a major uptrend on its monthly chart with an initial upside target area between 0.76027 and 0.77410. The selloff during August looks to be Wave 4 of the 5-wave uptrend pattern. 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): I’m going to call the major trend sideways-to-up, with resistance at the long-term high of 0.21773 (April 2022) and support the long-term low of 0.18131 (July 2022). 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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