US$: starting to look vulnerable.

The US$ remains range-bound with a lengthy (6 months!) Flag pattern but has dipped below 95.50 support and is starting to look a bit vulnerable. The FX indices are now also trading in a ‘risk on‘ alignment and so that is something worth keeping in mind in the coming sessions.

NB: I am away this w/e at a funeral and so this is just a brief update.

USDX weekly: still within the Flag but note the bearish weekly candle and close below 95.50 support:

USDXweekly

EURX weekly: still range-bound here too but it has printed a bullish weekly candle:

EURXweekly

FX Index alignment: the USDX and EURX are aligned for LONG EUR and SHORT US$ on both the 4hr and daily charts. These periods often, but not always, result in decent and more predictable trending markets. These charts are shown below:

USDX daily: below the Cloud:

USDXdailyCloud

USDX 4hr: below the Cloud:

USDX4hrCloud

EURX daily: above the Cloud:

EURXdailyCloud

EURX 4hr: above the Cloud:

EURX4hrCloud

Summary: The US$ is looking a bit vulnerable at the moment but there is a lot of US data next week that might help to either sharpen or re-route the trend here. Strong data prints might help the US$ to stage a fight-back but weak prints might only add to recent bearish sentiment. The main US$ sensitive items this coming week include:

  • Mon 12th: USD Bank Holiday.
  • Tue 13th: CNY Trade Balance. 
  • Wed 14th: CNY CPI. USD Core Retail Sales, PPI, Retail Sales.
  • Thurs 15th: USD CPI, Core CPI, Unemployment Claims & Philly Fed Manufacturing Index.
  • Fri 16th: USD Prelim UoM Consumer Sentiment.

You will note that I’ve included CNY Trade Balance and CPI data as well. A decent print with one of either of these CNY items might keep pressure on the US$ but weak results could offer support, even if only in the short term. The Commodity currencies might take more advantage of any upbeat CNY data than the US$!

Please remember: I still consider the US$ is in no-man’s land whilst it trades above 92.50 and below 100. I continue to wait for a decisive breakout from this region to signal the next major directional move on the index as this choppy and range-bound price action has gone on for over six months now. Thus, the levels to keep watching on the USDX are:

  • The weekly chart Flag trend lines.
  • The psychological 100 level above current price. This is the top of the recent trading range.
  • The 92.50 level below current price. This is the bottom of the recent trading range.