Side Note: For the record, I’m in agreement with Warren Buffett’s thoughts on technical analysis, at least in the Currencies sector. Buffett has said on the subject, “I realized that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer.” The latest round of monthly charts for the various currencies (as well as previous edition’s) continue to show few clear technical patterns. Given this, I’ve switched to monthly close-only charts to remove some of the noise. Also, with as many markets showing a lack of technical clarity month after month, we are possibly seeing signs of the evolution of algorithm trade.
The US dollar index ($DXY): The $DXY still looks to be in a major (long-term) sideways-to-down trend. Note that monthly closes continue to show a series of lower highs and lower lows, albeit on wide swings. For example, the index closed September 2024 at a low of 100.78 before rocketing to a November settlement of 105.74, a gain of 4.9% on post-US presidential election euphoria/hysteria. Theoretical Positions: Investors have likely moved to the sidelines given the lack of clear trends. However, some may still be holding short positions near the September 2022 close of 112.12.
The Euro (^EURUSD): The monthly close-only chart for the euro also shows a sideways trend, generally, with the November close of 1.05782 testing series of lows near the February 2023 mark of 1.05763. The difference I see is highs have been increasing over time, though not enough to keep buyers interested long-term. Theoretical Positions: As with the US dollar index, both investors and hedgers are likely concerned about the risk in both directions yet unclear on the best way to cover that risk.
The euro/Canadian dollar (^EURCAD) looks to be in a major uptrend, despite the solid selloff seen during November. Theoretical Positions: Traders are most likely on the sidelines at this time.
The Canadian dollar (^CADUSD) is one of the few currencies showing a clear major trend, in this case down. November saw the loonie move below previous low monthly closes of 0.72067 (October 2023) and 0.72229 (September 2022) on its way to a settlement of 0.71410. The major low is 0.71081 from March 2020. Theoretical Positions: Traders might’ve gone short the Canadian dollar as it took out previous low monthly closes.
The Brazilian real (^BRLUSD) is also in a major downtrend as it fell to a new all-time low monthly close of 0.16741 at the end of November. The previous mark was 0.17407 from October 2020. Theoretical Positions: Traders might’ve gone short the real as it took out previous low monthly closes.
