The US dollar index ($DXY) extended its major (long-term) uptrend to a high of 114.78 during September. However, by falling back to close at 112.12, monthly stochastics established a bearish crossover above the overbought level of 80%. This is again a signal the major trend could be set to turn down, though needing a reversal pattern to confirm such a move. Also, this is only the latest in a series of bearish crossovers by monthly stochastics above 80%. It’s possible the $DXY could consolidate for a few months as it moves toward a bearish reversal pattern.
The euro (^EURUSD) extended its major downtrend to a low of 0.95364 during September, but as with the US dollar index the slight rally to end the month allowed monthly stochastics to establish a bullish crossover below the oversold level of 20%. This is a signal the major trend could be set to turn up, but needs a reversal pattern to confirm. This could take a few months to complete, with the key being the euro’s ability to hold above the September low.
The Canadian dollar (^CADUSD) collapsed during September, hitting a low of 0.72265 before closing only slightly off that mark at 0.72299. Monthly stochastics indicate there is more time and space below the market, with the next target near 0.71400.
The Brazilian real (^BRLUSD) was also under pressure during September, finishing the month at 0.18481 and within sight of its monthly low of 0.18423. The previous 4-month low is 0.18131 from July. It will be interesting to see how the real reacts to Brazil’s presidential election with Lula expected to defeat the incumbent Bolsonaro.