Monthly Analysis: Currencies

2023-10-01T09:02:05-05:00October 1st, 2023|Monthly|

The US dollar index ($DXY) rolled into a major (long-term) uptrend as it first posted a new 4-month high beyond 104.70 then a new 2023 high beyond 105.88. The next major upside targets are between 107.18 and 108.97, the 50% and 61.8% retracement levels of the previous major downtrend from 114.78 (September 2022) through the low of 99.58 (July 2023). Theoretical Positions: Traders would’ve taken profits on short positions from near 112.12 (September 2022 close) as the $DXY hit a new 4-month high of roughly 104.72, a gain of about 7.40. New long positions would’ve been established at roughly the same price, roughly 104.70, with positions added as a new 2023 high was set near 105.90. This would create an average long of about 105.30, with a stop below the July 2023 low of 99.58.

The euro (^EURUSD) moved into a major downtrend as it fell to a new 4-month low below 1.06354 during September. The downside target area is between 1.04055 and 1.02003, the 50% and 61.8% retracement levels of the previous major uptrend from 0.95360 (September 2022) through the July 2023 high of 1.12754. Theoretical Positions: Traders would’ve been stopped out of previous long positions from 0.98024 (close of September 2022) just below the previous 4-month low of 1.06354 for a gain of 0.0833. New short positions would’ve been established at the same price, with stops above the July high of 1.1275.

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. Wave C (third wave) was confirmed as spread took out the June low of 1.4284 during September. The next downside target area is between 1.3994 and 1.37302, the 50% and 61.8% retracement levels of the previous major uptrend from 1.2876 (August 2022) through the April 2023 high of 1.5112. Theoretical Positions: Traders might’ve liquidated 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). Additional short positions could’ve been established below the Wave A low of 1.4284, putting the average position at 1.43973. Stops would be placed above the Wave B high of 1.48813 (July 2023).

The Canadian dollar (^CADUSD) still looks to be in a major uptrend, though I’m inclined to call it sideways. The loonie took out its previous 4-month low of 0.73238 during September as it dropped to 0.73023. This move might’ve stopped out recently established long futures positions.¬†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. If sells stops were triggered below the previous 4-month low of 0.73238 from May, then the average loss would’ve been 0.01018.

The Brazilian real (^BRLUSD) is another market where the major trend is not clear. For now I’ll continue to call it an uptrend, though the real was near its previous 4-month low of 0.19695 (September low) as September came to an end. A move below that mark could trigger increased selling. 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 0.19695 from September 2023.

Go to Top