On vacation through Tuesday

Daily DXY Roundup: 11/12

The US Dollar Index (DXY) reached a fresh 5-week high before pulling back in the North American session. Heightened risk-aversion enabled the greenback to test the 50-day moving average for the first time in more than 2 months. Weekly studies have shifted higher and the weekly close has marked a bullish engulfment. A confirmed double bottom hints of further near-term gains, given daily MACD has broken above the midpoint threshold. The next hurdle for dollar bulls is the 38.2% Fibonacci retracement level at 78.650. While there is a high probability of forming another higher low within the next few days, a pullback to the 20-day moving average cannot be ruled out.

The EUR/USD found support at the 50-day moving average, likely completing the first leg of an A-B-C correction. A daily close below the 1.3622 region (Fibonacci retracement) will shift focus onto the 1.34 handle, where the corresponding 50% retracement lies. Meanwhile, the Euro Index (EXY) has given up nearly half of its gains from June’s yearly low.

The USD/JPY recovered from weakness in the overnight session to retest the key 50-day moving average once again. Above this resistance would mark the first back-to-back series of higher lows since late July. If confirmed, the critical 83 handle will be exposed. Meanwhile, another test of the 20-day moving average could materialize next week due to increased risk aversion.

The S&P 500 has finally closed below 14-day moving average support. This confirms the termination of the latest powerful 3rd wave, opening up the possibility of a complex 4th wave correction. The 1175/1180 region is where I anticipate this correction will likely end up. This would be roughly 61.8% the size of the 2nd wave, which is what supported the euro in its 4th wave correction last month.

11/12: CHART OF THE DAY

11/11: CHART OF THE DAY

Daily DXY Roundup: 11/10

The DXY’s (US Dollar Index) recovery completed the initial correction target before reversing course. The late October highs were tested before bearish diverging hourly studies took hold. This triggered a reversal that wiped out most of the day’s gains, leaving a daily doji hammer formation. However, since it took only 4 days to match the previous 6-day decline, there is a high probability of forming a higher low within the next few days. While previous 20-day moving average resistance is the most likely candidate of support, a deeper retracement cannot be ruled out. In the process of completing a bear campaign of this magnitude, it is not uncommon to retrace a major portion of the corrective recovery. Thus, key proportions to watch are the 25%, 38.2%, 50%, 61.8% & 78.6% retracements of the latest 4-day range.

The USD/JPY rebounded to test the 50-day moving average. A higher low on top of previous range resistance near the 82 handle would be an encouraging development for dollar bulls. Meanwhile, a daily close below the formerly resistant 20-day moving average would be bearish.

Treasury market developments took center stage in late afternoon trade, as the 30-year bond auction fuelled a short-covering rally along the entire curve. This in turn dragged down yield differentials which added steam to the US Dollar's bearish reversal. While price-action for US yields was decisively bearish today, further consolidation is favored in the medium-term.

11/10: CHART OF THE DAY

Daily DXY Roundup: 11/09

The US Dollar Index (DXY) recovered from selling pressure earlier in the day to close above the 20-day moving average for the first time in nearly two weeks. Since completing impulsive weakness last week, dollar bulls look poised to retest the late October highs above the 78 handle. Additional strength would expose the 50-day moving average, given bullish diverging daily studies.

The Japanese Yen was the weakest component of the day. The USD/JPY broke-out in late trade once the 20-day moving average was cleared. This marks the first daily close above key resistance in more than 6 weeks. As such, continued strength towards the 50-day moving average is now favored.

The most interesting price-action was not in the fx market, but rather in the metals complex. Both Gold and Silver reached fresh cycle highs before pulling back quite substantially. Gold marked a key reversal day and Silver put in a daily spinning top. Follow-through weakness would trigger further support for the DXY.