The US dollar index ($DXY): There continues to be no consistent trend with the US dollar index as it closed February at 107.61, down 0.12 for the month. Looking ahead to March, the US Federal Open Market Committee is expected to leave the Fed fund rate unchanged at the conclusion of its 2-day meeting (March 19). What will this do to the dollar? I don’t know. Analytically, I can make a strong argument for the weakening of the US currency and strengthening of the greenback, the latter based on the idea inflation will be strengthening over the coming months and years. Theoretical Positions: If long-term investors bought near the November close of 105.78 in early December based on that month’s new 4-month high, these positions might’ve been lifted near the January settlement of 108.37 in early February based on January’s completion of a bearish spike reversal. Investors are likely on the sidelines at this time.
The Euro (^EURUSD): The flip-side of the US dollar index is the euro. Here we see a new low of 1.017766 was posted during January before the euro closed at 1.03595, up fractionally for the month. This coincided with a bullish crossover by monthly stochastics below the oversold level of 20%. From a technical point of view, the euro both signaled (stochastics) and confirmed (reversal pattern) a new major uptrend. 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. If so, these positions would’ve been bought back and new longs established near the January close of 1.03595 with sell stops below the January low of 1.01776. The euro closed February at 1.03763.
The euro/Canadian dollar (^EURCAD) looks to be in a major sideways trend. Theoretical Positions: Traders are most likely on the sidelines at this time. Buy orders may be above the previous 4-month high of 1.51711 with sell orders below the previous 4-month low of 1.44898. Both ends of the range were established last November.
The Canadian dollar (^CADUSD) completed a bullish key reversal on its monthly chart, confirming a move to a major uptrend. This coincided with monthly stochastics establishing a bullish crossover below the oversold level of 20% meaning the loonie both signaled (stochastics) and confirmed (reversal pattern) the new long-term trend. Theoretical Positions: Investors would buy back short Canadian dollar positions at roughly 0.71708 during November near the February settlement of 0.69125 and go long at the same level. Sell stops would be placed below the February low of 0.67604.
The Brazilian real (^BRLUSD) still looks to be in a major uptrend despite February’s lower monthly close. Theoretical Positions: Investors are likely no the sidelines at this point. Previous short positions might’ve been covered near the January settlement of 0.17118 based on what looked to be a bullish 2-month reversal. Those wanting to go long the real could wait for a test of the long-term low of 0.15832 from December.
P.S. If there are other currencies you’d like to see covered, please let me know. Thank you.
