Side Note: While long-term trends became clearer in the Currencies sector during December, the path ahead is covered by a dense fog. I talk about this in more detail in my next Weekly Column, “Through the Fog”, coming out on Friday, January 3, 2025. It also puts a spotlight on what could be a key discussion this year: Does technical analysis matter in this day and age of Watson? If not, what fundamentals can we look at? Or is it simply a Random Walk generated by algorithms? A lot to think about.
The US dollar index ($DXY): A look at the standard long-term monthly bar chart for the $DXY shows it extended its major (long-term) uptrend that began during November. That month saw the $DXY post a new 4-month high beyond 106.05 before hitting 108.58 in late December. This was its highest mark since November 2022. If we apply a simple measurement of the breakout of the previous sideways trend between 99.58 (low from July 2023) and 107.35 (high from October 2023), giving us a range of 3.78, and the November breakout point of 105.55 gives us a long-term target of 109.33. Theoretical Positions: It’s possible long-term investors bought near the November close of 105.78 in early December. Otherwise, they may be on the sidelines for now.
The Euro (^EURUSD): The flip-side of the recently established and extended major uptrend in the US dollar index is the major downtrend of the euro. Here we see a new low of 1.03336 was posted during November. Unlike the $DXY, though, the euro did not extend its move during December. Theoretical Positions: It’s possible long-term investors sold the euro during November, either at the breakout point of 1.078 or the November settlement of 1.08836 during in early December. Otherwise, investors may be on the sidelines.
The euro/Canadian dollar (^EURCAD) looks to be in a major sideways trend, though we need to keep in mind the breakdown 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. December saw the loonie extend its major trend to a low of 0.69127, closing in on its previous major low of 0.68170 from March 2020. Theoretical Positions: Traders might’ve gone short the Canadian dollar as it hit a new 4-month low below 0.71708 during November.
The Brazilian real (^BRLUSD) is also in a major downtrend as it fell to a new all-time low of 0.15832 during December. Theoretical Positions: Traders might’ve gone short the real as it took out previous 4-month lows since the breakout during April 2024.
