Dollar Hovers At Major Support

After the serious miss in US data on Wednesday it was a relief to see a positive US unemployment claims, positive US industrial production and a positive Philly Fed Manufacturing Index. We round the week off on Friday with another batch of US data with the focus on US Building Permits and the University of Michigan Survey along with Yellen on the wires. All of which should be important to decide the near term direction for the dollar now that rate hikes are less sure than previously. The S&P500 again bounced off the 10% retracement level before finding it’s feet again which some were using as the signal to begin buying again after consolidating positions higher up. All a little more encouraging than yesterday but the wheels could most definitely still come off if data does not please.

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USD% Index

usd index thu 16 oct 14
The previous multi-year high is acting now as a support having been broken a few weeks ago and it seems it may be used as a yardstick for dollar sentiment. If we hold above the level then we remain in a dollar up trend, albeit with a slight kink in the rally. A drop below and more importantly a hold below and we could see the dollar consolidate further. We are still very sensitive to news so Friday’s data may be volatile if not within the comfort zone. I am neutral USD%

USD% Index Resistance (EURUSD support): EURUSD 1.2764, 1.2739, 1.2700
USD% Index Support (EURUSD support): EURUSD 1.2822, 1.2893

EUR% Index

eur index thu 16 oct 14
The EUR% index sold quite well down to the 100 hour moving average before reversing all of the drop , closing above support once again. Considering USD data was quit good this seems slightly counter intuitive and perhaps a function of further consolidation. The Yen seems to have been the culprit for this noise as the key 10% level target for S&P500 buying triggered some Yen weakness as the level was rejected and as such the recent EURJPY drops were sharply reversed, fuelling another whip higher for the EUR% index. This is now building quite a constructive picture for the Euro as we have spent the best part of two weeks now mostly above the 100 hour moving average. The thick blue bearish trend line remains a key target if we do continue higher although the US data and Yellen are key milestones to determine if we get that far. The failure of the Euro trade weighted index to push below the magenta coloured 400 hour moving average places the current bearish channel in jeopardy and the risk of bullish breakout is higher than yesterday, particularly now that the pound is at key resistance. I am neutral / bullish EUR% in the short term

EUR% Index Resistance: EURUSD 1.2876, 1.2911, 1.3000
EUR% Index Support: EURUSD 1.2792, 1.2694

EURX Trade Weighted Index

EURX thu 16 oct 14

JPY% Index

JPY index thu 16 oct 14
The bounce in the S&P500 from a key level has seen the Yen consolidate the recent out-sized strength although we still remain inside a bullish channel which suggests Yen support at the 106.85 for USDJPY. The Nikkei 225 also remains with a bearish bias but has seen some consolidation. If this continues we could see another test of the USDJPY 100 hour moving average to add to our existing short position although a close eye on stocks will be essential. 104.00 remains a big level for USDJPY downside. I remain bullish JPY% but only if stock don’t rally

JPY% Index Resistance (USDJPY Support): USDJPY 105.73, 104.91, 104.00
JPY% Index Support (USDJPY Resistance): USDJPY 106.59, 106.85, 106,72, 107.46

GBP% Index

gbp index thu 16 oct 14
As suggested yesterday, the pound did indeed rally against the Dollar and the Euro although we now find ourselves at key resistance so the outlook is now determined by whether we will break or reject this level. Looking at the dollar it is slightly suggestive that we could reject and head lower for the pound but we have no way of knowing so should wait for the confirmation before entering a trade from here. EURGBP downside is now under way though, as demonstrated in the Sterling ERI trade weighted index shown below, which rallied from key support. I am bearish GBP%

GBP% Index Resistance: GBPUSD 1.6096, 1.6180, 1.6300
GBP% Index Support: GBPUSD 1.6018, 1.5924

Sterling Trade Weighted Index(top) vs GBP% index (bottom)

Sterling ERI thu 16 oct 14

AUD% Index

aud index thu 16 oct 14
One for the scalpers this, the Aussie has held firmly at the resistance shown at 0.8790 currently for AUDUSD. Still in an expanding triangle and still very indecisive we could now go quite a way in either direction before meeting resistance or support I have previously outlined my view that once market volatility drop we will see some AUDUSD upside via carry trades (so long as US rate hike expectations remain unsure) but after Wednesday’s volatile blow out that may now be a little further down the road which could see us break lower from here before we go higher. Perhaps once the stock market finds support we will see more encouraging signs of an Aussie rally. Gold remains bullish. I am bullish AUD% longer term

AUD% Index Resistance: AUDUSD 0.8790, 0.8941
AUD% Index Support: AUDUSD 0.8654, 0.8559

CHF% Index

chf index thu 16 oct 14
A nice rejection from the 50 hour moving average for the CHF% index highlights that the Franc is more bullish than the Euro currently and as such USDCHF shorts should outpace EURUSD longs. This is also reflected in fresh lows for EURCHF, although we are now once again near technical support for the cross and just over fifty pips away from SNB intervention. Taking it’s lead from US data the Franc will do whatever Yellen and the US data suggests although poor US data would likely be quite volatile for the Franc. I am neutral / bullish CHF%

CHF% Index Resistance (USDCHF support): USDCHF 0.9361, 0.9345
CHF% Index Support (USDCHF resistance): USDCHF 0.9454, 0.9500

LittlefishFX Relative Currency Index Strength

All of the currency indexes used for this analysis are available as a NinjaTrader indicator from the link below. They are eight indexes, USD, EUR, JPY, GBP, AUD, CHF, CAD and NZD with each index made up of the remaining seven pairs, weighted in accordance with the distribution of global FX volume as measured by the Bank of International Settlements in their Triennial Survey.

Get RCIS Indicator here