DXY Index Nears Resistance as First EUR/USD H&S Target Hit

Talking Points:

– EUR/USD hits initial conduct shoulder’s aim of 1.1554 as summarized on Oct 6.

– DXY Index trade only next 95.17, a Jul 20 bearish outward engulfing bar that helped conclude a greenback’s mid-year swoon.

Retail merchant sentiment continues to change in a approach that advise USD-pairs might still spin higher.

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Amid what should be a still week altogether on a mercantile calendar, a US Dollar is pulling a Oct highs and a top turn altogether given Jul 20. With many of a concentration in a United States on a swell of taxation remodel legislation, short-end US Treasury yields continue to stay towering and pull higher: a 2-year produce stays nearby a top rate given Oct 2008.

Yet a timing of where a DXY Index finds itself trade into – a Jul 20 bearish outward engulfing bar that helped conclude a greenback’s mid-year impassivity – can’t be abandoned given a new relapse in EUR/USD. As 57.6% of a altogether DXY, where a Euro goes, so too does a broader dollar guage.

Accordingly, as initially summarized on Sep 26 and discussed in serve fact on Oct 6, EUR/USD’s conduct shoulders commanding settlement resulted in a pierce down to 1.1554, today’s low. While EUR/USD’s technical structure stays really many bearish – cost is next a daily 8-, 13-, and 21-EMA envelope, with both MACD and Stochastics trending reduce in bearish domain – a multiple of EUR/USD’s conduct shoulder’s aim being strike during a same time a DXY Index is using into pivotal insurgency might meant that a greenback’s new uptrend could be due for a pause.

Chart 1: DXY Index Daily Timeframe (June to Nov 2017)

DXY Index Nears Resistance as First EUR/USD Hamp;S Target Hit

Elsewhere, both USD/CHF and USD/JPY keep bullish technical structures interjection to US yields staying towering (particularly a 2-year yield, that a Bank of International Settlements – a executive bank of executive banks – has identified as a many successful seductiveness rate along a produce bend in terms of final banking sell rates).

In both pairs, cost is above a 8-, 13-, and 21-EMA envelope, while MACD and Stochastics are trending aloft in bullish domain (above a median or neutral lines). USD/JPY needs to see a mangle of a May and Jul pitch highs nearby 114.50 before new prolonged positions are eyed. For USD/CHF, a double bottom aim of 1.0108 stays in play following a mangle by 0.9770 final month.

See a above video for technical considerations in a DXY Index, EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CHF, and NZD/USD.

Read more: FX Markets Turn to Asia-Pacific Region for Top Drivers in Week Ahead

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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