USD Index by David Solin

In the $ index, the view for at least a few weeks of upward ranging since Nov, has played out.  Though there are still no signs of a near term top, this month long rally is getting “late in the move”, while the gains are seen as a larger correction (and not the start of a major new upleg, see longer term below).  Note too from a sentiment standpoint, many have jumped on the bullish side and is more a characteristic of a correction versus the start of a major new trend (most will tend to “fight” moves at important turning points), while the seasonal chart also points sharply lower into the end of the year (see seasonal chart/3rd chart below).  The bottom line is that lots of negatives are evident in the market, suggesting that any further new highs would likely be limited and part of a larger topping.  Missed the rebuy from the Dec 11th email and for now, would wait for slightly higher levels toward 78.20/30 (50% from the Aug high at 82.15) or on better signs “pattern-wise” of a near term top to short (not there yet).  Nearby support is seen at the multi-week bullish trendline (currently at 76.35).

In the $ index, the view for at least a few weeks of upward ranging since Nov, has played out.  Though there are still no signs of a near term top, this month long rally is getting “late in the move”, while the gains are seen as a larger correction (and not the start of a major new upleg, see longer term below).  Note too from a sentiment standpoint, many have jumped on the bullish side and is more a characteristic of a correction versus the start of a major new trend (most will tend to “fight” moves at important turning points), while the seasonal chart also points sharply lower into the end of the year (see seasonal chart/3rd chart below).  The bottom line is that lots of negatives are evident in the market, suggesting that any further new highs would likely be limited and part of a larger topping.  Missed the rebuy from the Dec 11th email and for now, would wait for slightly higher levels toward 78.20/30 (50% from the Aug high at 82.15) or on better signs “pattern-wise” of a near term top to short (not there yet).  Nearby support is seen at the multi-week bullish trendline (currently at 76.35).

 

Longer term as mentioned above, the gains since the Nov low at 74.50 are seen as a correction (wave 4 in the fall from the June high at 83.25, see numbering on weekly chart/2nd chart) and suggests an eventual resumption of the fall back to 74.50 and below within wave 5 (see “ideal” scenario in red on weekly chart below).  Note too that this would be the final downleg in the fall from the June high at 83.25.

 

David Solin
Partner, Foreign Exchange Analytics
E-mail dsolin@fxa.com, (860) 767-9102

 

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Foreign Exchange Analytics has it's roots in both the emerging information technologies and the global economy that characterized the last two decades.  As currency transaction volumes soared in the wake of the 1985 Plaza accord, the need for timely concise information on what forces were driving and would drive exchange rates became critical.   David Gilmore was one of a new breed of analyst that saw a void of relevant, market moving... More