Fundamental Update from Monday, May 3rd
As we get into the month of June, I would like to first start by saying this is a very important time to not rush into trades. Simply, because that market (Institutions down to retail traders) could have differently ascertained opinions of where the market for certain pairs will be headed. Regardless, this update is intended to steer you in the best direction I feel personally. This is unbiased and strictly follows my understanding of the marriage between fundamentals and technicals going forward into this month.
DXY:
I have drawn a very significant trend-line referred to as a "parallel" trend-line. It starts from April 26, 2018, extended through October 2017 and extended through today. If you notice, it has absolutely been critical in every reflection point in price for the DXY in terms of backtesting. We were looking for a weekly close above, to invalidate the continued uptrend for the DXY. This is so important for you all to understand. We've seen a contraction both in terms of a risk-off sentiment and a slow down in dollar growth. This includes average true range (ATR), which is a technical indicator in which shows possible volatility.
The 97.87 is a 61.8% of the late 2017 decline from the dollars highs of 103. This is huge. We may have the turn of the dollar from here for the next year. This will be determined by the geopolitical risks at play.
Taking a look at the fed funds futures, we can tell that market expectations for interest rates have continued to become higher. There's a 97% chance the fed will cut interest rates by the end of 2019. For those new to how this works: interest rate cuts are a sign that the FED (who by law act on previous economic numbers, not current) is seeing a recessionary environment playing true for the United States Dollar via a slowdown in growth of GDP and a rise in employment.
Long story short, for 5 weeks we've failed to break the level of 97.87 on the weekly.
For this I've used two technical indicators. The "rate of change" set to a length of 20 (since it's the weekly), and the "average true range"; also set to 20 for the length.
I need to stress for those that are new to these indicators, what I'm about to explain is referring to a break to the downside for the DXY. A major trend shift. Taking a look at the ATR and the ROC, the last time these indicators were at this level was 2015, before the dollar shot up +25%. Now, we can expect a significant trend change, but I feel it will be to the downside with the geopolitical risks in play.
It's paramount to understand that dollar weakness is coming.
A big drop.
Into the week, we could see some bullish price action for DXY, keeping in mind we have NFP on friday, I do think 97 is a solid downside target for this week. With the contraction and the price action seen from the parallel trend-line as mentioned above, we want to be mindful of a weaker dollar this week.
As we get into the month of June, I would like to first start by saying this is a very important time to not rush into trades. Simply, because that market (Institutions down to retail traders) could have differently ascertained opinions of where the market for certain pairs will be headed. Regardless, this update is intended to steer you in the best direction I feel personally. This is unbiased and strictly follows my understanding of the marriage between fundamentals and technicals going forward into this month.
DXY:
I have drawn a very significant trend-line referred to as a "parallel" trend-line. It starts from April 26, 2018, extended through October 2017 and extended through today. If you notice, it has absolutely been critical in every reflection point in price for the DXY in terms of backtesting. We were looking for a weekly close above, to invalidate the continued uptrend for the DXY. This is so important for you all to understand. We've seen a contraction both in terms of a risk-off sentiment and a slow down in dollar growth. This includes average true range (ATR), which is a technical indicator in which shows possible volatility.
The 97.87 is a 61.8% of the late 2017 decline from the dollars highs of 103. This is huge. We may have the turn of the dollar from here for the next year. This will be determined by the geopolitical risks at play.
Taking a look at the fed funds futures, we can tell that market expectations for interest rates have continued to become higher. There's a 97% chance the fed will cut interest rates by the end of 2019. For those new to how this works: interest rate cuts are a sign that the FED (who by law act on previous economic numbers, not current) is seeing a recessionary environment playing true for the United States Dollar via a slowdown in growth of GDP and a rise in employment.
Long story short, for 5 weeks we've failed to break the level of 97.87 on the weekly.
For this I've used two technical indicators. The "rate of change" set to a length of 20 (since it's the weekly), and the "average true range"; also set to 20 for the length.
I need to stress for those that are new to these indicators, what I'm about to explain is referring to a break to the downside for the DXY. A major trend shift. Taking a look at the ATR and the ROC, the last time these indicators were at this level was 2015, before the dollar shot up +25%. Now, we can expect a significant trend change, but I feel it will be to the downside with the geopolitical risks in play.
It's paramount to understand that dollar weakness is coming.
A big drop.
Into the week, we could see some bullish price action for DXY, keeping in mind we have NFP on friday, I do think 97 is a solid downside target for this week. With the contraction and the price action seen from the parallel trend-line as mentioned above, we want to be mindful of a weaker dollar this week.
