Since putting in a top on 7/9 the US dollars trajectory has been lower but clearly that has changed today catching a bid and higher by better than 1% as of this post. I have been suggesting in recent posts that we get a bounce from oversold levels and it appears the market is delivering. In today’s action we can clearly see a higher low and higher high with futures fast approaching all key MAs I use in FX…the 20 day SMA, 34 EMA and finally the 50 day SMA.
If you look closely you can identify a gap that formed from the close on the 7/10 and the open on 7/11 that I expect to be filled on this ascent putting futures at a minimum at 83.64 or 1.5% above current trade. Obviously if the greenback catches a bid we will see other crosses lose value as is playing out today with all majors getting hit today. The fact that the ECB and BoE both left rates alone at 0.50% today could also have contributed.
Tomorrow expectation for NFP are 184,000 and unemployment 7.5%…without any curve balls expect the greenback to continue to grind higher and other crosses lower. My favored FX plays would be short exposure in the Swiss and/or Euro with stops above the recent highs and bearish plays in the Loonie. .9750/.9800 should contain upside in the CAD.
The Fed did not give a clear signal on their timing on an interest rate increase but based on the action since yesterday…the dollar higher, energies and stocks higher and bonds getting roped the market appears to be pricing an increase. The market is always right so expect as we digest Fed rhetoric this to last at least a few days if not weeks.
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