Monthly Analysis: Currencies

2022-11-01T09:20:09-05:00November 1st, 2022|Monthly|

The US dollar index ($DXY) consolidated during October, staying well within September’s wide range before closing lower for the month. Therefore, no clear reversal pattern has been completed to confirm a new major (long-term) downtrend indicated by the most recent bearish crossover by monthly stochastics above 80%. As I talked about last month, the latest occurred at the end of September. And while I don’t see a clear 5-wave uptrend pattern, I am expecting the $DXY to move into a downtrend after a few months of consolidation. Given this, we need to keep our eyes out for a new 4-month low in either January or February.

The euro (^EURUSD) also consolidated during October, also looks to be in the process of turning its major trend up over time. The most recent bullish crossover by monthly stochastics below the oversold level of 20% was at the end of September, with a new 4-month high possible in the January/February time frame. From a price distribution point of view, the euro doesn’t spend much time below 1.00 (par with the US dollar) though the last two months have seen settlements of 0.98024 and 0.98796. This could invite increased global investment to the market.

The Canadian dollar (^CADUSD) completed a bullish spike reversal during October, confirming a new major uptrend should be in place. The loonie initially extended the previous downtrend to 0.71550 before rallying to close at 0.73395, up 0.01096 for the month. This coincided with a bullish crossover by monthly stochastics below the oversold level of 20% meaning the new uptrend was signaled (stochastics) and confirmed (spike reversal) at the same time. A tendency of spike reversals is to quickly fall back to test the previous low before starting on the long-term rally.

The Brazilian real (^BRLUSD) continues to do next to nothing on its long-term monthly chart. That being said, the real did close higher at the end of October, settling at 0.1931 as compared to September’s final 0.18481. Now we’ll see how investors feel about the presidential election, particularly if the defeated incumbent Bolsonaro refuses to concede and/or accept the results. Key prices for a breakout is the previous 4-month high of 0.19949 and 4-month low of 0.18131.

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