Monthly Analysis: Currencies

2022-04-02T10:46:52-05:00April 2nd, 2022|Monthly|

The US dollar index ($DXY) extended its major (long-term) uptrend to a high of 99.42 during March. While the $DXY is showing no sign of a top, its monthly stochastics are at 90% or higher indicting the greenback is sharply overbought. This tells us we need to be on the lookout for a possible bearish reversal pattern of some type, regardless of fundamentally bullish news of expected interest rate hikes. It should be noted the $DXY posted a bearish 2-week reversal pattern three weeks ago before following that with a bearish outside range last week. This tells us the secondary (intermediate-term) trend has turned down, a move that could possible put a major top in as well.

The euro (^EURUSD) extended its major (long-term) downtrend during March, hitting a low of 1.08063 before recovering to finish the month at 1.10657. Look for the ^EURUSD to consolidate pithing the March trading range for a couple months before starting to more higher. As with the US dollar index, I do not see a major reversal pattern on this monthly chart, though both the minor (short-term) and secondary (intermediate-term) trends look to be trying to turn up. The DNAI in-house algorithm is showing a long theoretical position for both timeframes, adding to the intermediate-term position. Initial secondary resistance is at the previous 4-week high (last week’s high) of 1.11845.

The Canadian dollar (^CADUSD) continues to go nowhere fast on its monthly close-only chart. However, I will stick with the conclusion the loonie has not finished off its previous major (long-term) downtrend leaving the door open for another test of the low monthly close of 0.78249 from November 2021. If so, this would again test the 38.2% retracement mark of the previous major uptrend at 0.78354. On the other hand, a monthly close above the recent high of 0.79931 would indicate the ^CADUSD should continue to firm. Again, the loonie remains in no-man’s land giving no clear bullish or bearish signals.

The Brazilian real (^BRLUSD) finally posted a bullish breakout during March, hitting a high of 0.21157. This is the strongest the real has been since March 2020 and opens the door to a possible extension of this move to near 0.2290. However, note monthly stochastics have quickly climbed to near or above 90% indicating the real is sharply overbought. Eventually this could bring sellers back to the market. From a technical point of view, the breaking of the sideways range (0.3983) between 0.16756 (May 2020) and 0.20739 (June 2020) puts the upside target near 0.24722, roughly the 50% retracement level of the previous major downtrend.

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