Dollar Strength Takes EUR/USD Into Key Support, USD/JPY Above 100-DMA

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Talking Points:

US dollar strength picked adult on Tuesday where it left off on Monday. The strength for a greenback was clearly seen opposite a breakwater currencies, a CHF JPY, as good as EUR and AUD. Haven currencies have unsuccessful to convene as a CBOE SP Implied Volatility Index or VIX sealed on Monday during a lowest spin given 1993. The Australian dollar, on a other hand, unsuccessful to find strength after being aggressively sole as Iron Ore continues a giveaway tumble due to fear of increasingly diseased direct in China.

USD/JPY appears to be a transparent USD play as JPY took over a weakest position in a G8 strong/ diseased index on Tuesday, replacing a Australian Dollar. On Tuesday, USD/JPY traded above a 100-DMA, and we could be operative on a pierce toward a early Mar high of 115.50 if a stream sourroundings stays undisturbed. Currently, a strongest G8 banking in early May is a British Pound, which will shortly have ‘Super Thursday’ to assistance establish either wire has serve upside. According to information from a Depository Trust Clearing Corporation (DTCC) that was collected by Bloomberg, there is a building thesis of Bullish USD/JPY options (calls) that are widespread out over a entrance year. The many Bullish of a $12 billion in options bearing serve USD strength was looking for a hold of 133 in USD/JPY by subsequent year.

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Short-term movement stays in preference of USD. However, to get a improved design on what’s building in EUR/USD, we should demeanour to a short-term draft (shown below). While there are elemental developments that preference serve EUR upside, a draft needs to agree. An agreement from a draft might demeanour like a disaster for EUR/USD to mangle next a 1.0850/1.0740. If a cost stalls above or in this zone, and afterwards breaks higher, we could be resuming a pierce higher, that would preference a pierce into new 2017 highs. A mangle and tighten next 1.0740 would open adult a perspective that DXY strength might be anticipating uninformed preference opposite a board, and not only opposite diseased currencies like AUD, JPY, CAD.

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Closing Bell’s Top Chart: May 9, 2017, ST EUR/USD stares down pivotal support during 1.0850/1.0740

Dollar Strength Takes EUR/USD Into Key Support, USD/JPY Above 100-DMA

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Dollar Strength Takes EUR/USD Into Key Support, USD/JPY Above 100-DMA

France 40: As of May 9, retail merchant information shows 46.6% of traders are net-long with a ratio of traders brief to prolonged during 1.14 to 1. In fact, traders have remained net-short given Apr 19 when France 40 traded nearby 5094.6; cost has changed 5.7% aloft given then. The series of traders net-long is 3.4% reduce than yesterday and 108.9% aloft from final week, while a series of traders net-short is 0.2% aloft than yesterday and 37.7% reduce from final week.

We typically take a contrarian perspective to throng sentiment, and a fact traders are net-short suggests France 40 prices might continue to rise. Positioning is some-more net-short than yesterday though reduction net-short from final week. The multiple of stream view and new changes gives us a serve churned France 40 trade bias.(Emphasis Mine)

The assertive arise in long-positioning will take on some-more significance if cost can mangle next draft support. Admittedly, we’re a prolonged approach from pronounced support, that now lies during a Apr 19 low during 4,978.7 or ~9% from Tuesday’s close.

Written by Tyler Yell, CMT, Currency Analyst Trading Instructor for DailyFX.com

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