Monthly Analysis: Currencies

2022-07-03T08:56:50-05:00July 3rd, 2022|Monthly|

The US dollar index ($DXY) ignored the bearish spike reversal form May, spending most of June above the previous month’s settlement of 101.75 on its way to posting a new high of 105.79. This was the strongest the $DXY had been since posting 106.97 during November 2002. Technically the greenback remains sharply overbought, as indicated by monthly stochastics running at or above 90%. Still, this hasn’t seemed to slow global buying interest driven by the bullish fundamental of continued interest rate hikes by the US Federal Reserve. And as Newsom’s Market Rule #6 tells us: Fundamentals win in the end.

The euro (^EURUSD) still looks to been a major (long-term) uptrend, though the currency nearly erased the bullish spike reversal completed during May. The previous month saw the euro post a low of 1.03498 before closing at 1.07328. Once the calendar flipped to June the euro came under immediate pressure, resulting in a monthly low of 1.03593 and close at 1.04898. As we make our way through July it will be important for the euro to hold the May low, otherwise the bullish spike reversal from May will be erased. Monthly stochastics continue to show a sharply oversold situation, though this has not sparked a strong round of buying.

The Canadian dollar (^CADUSD) continues to grind sideways to down as it completed a bearish outside month during June. This means the loonie took out the May high and low before closing at 0.77672, 0.01373 lower for the month. Technically, this opens the door for a test of the next downside target near 0.7572, the 50% retracement level of the previous major (long-term) uptrend from 0.6817 (March 2020) through 0.82369 (June 2021). Monthly stochastics are near the oversold 20% level, but not in position for a bullish crossover this month.

The Brazilian real (^BRLUSD) continues to show a difficult long-term monthly chart. The month of June saw the real come under pressure, falling to a low of 0.18942 before closing at 0.19016, down 0.02085 for the month. July has already given us something to talk about as the June low was the new 4-month low, and last Friday (July 1) saw the real fall to 0.18734. A move to a new 4-month low is a bearish momentum indicator and opens the door to continued pressure on the real. A big picture ramification of this is it could lead to increased cancellations of US soybean export sales or rolling of those sales to new-crop as China looks for cheaper supplies from Brazil, with all eyes on late winter and spring weather in South America.

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