The US dollar index ($DXY): The $DXY looks to be in a major (long-term) sideways trend. The DXY has been unable to extend its previous uptrend, posting alternating higher and lower monthly closes. The initial range heading into August was between the previous 4-month high of 106.52 (April) and 4-month low of 103.65 (July)*. The next levels are the high of 107.35 (October 2023) and 100.62 (December 2023). *For the record, the DXY took out its previous 4-month low early in August indicating it could extend its selloff. Theoretical Positions: New long positions would’ve been established as the $DXY hit a new 4-month high during September 2023, roughly 104.70, with positions added as a new 2023 high was set near 105.90. Additional longs could’ve been established during April at a new 4-month high beyond 104.98 (February 2024). This would create an average long of about 105.20, with sell stops below the 4-month low of 103.65 (July 2024). These stops would’ve been triggered in early August 2024.
The euro (^EURUSD): The euro remains in a major 3-wave downtrend with the December 2023 high of 1.11395 looking to be the peak of Wave 7 (Wave B, second wave of the 3-wave pattern). If so, then the euro would be expected to take out the Wave 6 low of 1.04487 (October 2023) with next downside targets at 1.04059 and 1.02007, the 50% and 61.8% retraecment levels respectively of the previous major uptrend from 0.93564 (September 2022) through the high of 1.12754 (July 2023). Theoretical Positions: New short positions would’ve been established near 1.06354. Additional short positions could’ve been established below the 4-month low of 1.06951 during April. If so, the average position would be 1.06652 with buy stops above the 4-month high of 1.09481 (July 2024).
The euro/Canadian dollar (^EURCAD) is a tough call after posting a new 4-month high of 1.50350 during July. Resistance remains at the previous long-term high of 1.51118 (April 2023). For the record, the EURCAD took out the previous mark in early August. 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). If show, these positions would’ve been stopped out on the move to a new 4-month high during July.
The Canadian dollar (^CADUSD) looks to be in a sideways trend, the range between the high of 0.75883 (December 2023) and low of 0.71950 (November 2023). Theoretical Positions: Traders could be long from the October 2022 close of 0.73395 based on a bullish spike reversal. Additional longs might’ve been established near the March 2023 settlement of 0.73975, putting the average long near 0.73685. Also, additional longs may have been established during June as the loonie took out its previous 4-month high of 0.75398. If so, the average long position would now be 0.74256. Sell stops below the previous 4-month low of 0.72225 from April would’ve been triggered during July.
The Brazilian real (^BRLUSD) extended its major downtrend during July to a low of 0.17542. Theoretical Positions: Traders may have sold the real on the break below the April 2024 low of 0.18904 during June.
