Navigating The Price Action–A Few Thoughts

We had anticipated the dollar is under pressure in the first part of the week. Today’s losses are coming despite slightly wider US 2-year premiums. Position adjusting seems to be the main factor, but it is not immediately clear if it is ahead of the ADP jobs estimate and FOMC meeting tomorrow or the US election. Trump’s support had bottomed before the FBI re-opened the investigation into Clinton’s emails, and his support appears to be continuing to edge higher.  

We noted in our last technical view that the Dollar Index snapped a three-week advance last week. We identified initial support in the 98.00-98.20 area and warned that a break could see 97.60.Today’s low thus far is 97.74. The Dollar Index has fallen through the 20-day moving average for the first time in a month. A break of the 97.60 area would suggest a deeper correction is in the store that could carry it toward 96.75. 

The euro recorded a seven-month low on October 25 near $1.0850. It reached nearly $1.1065 today, which is the best level since October 12. We had foreseen potential toward $1.1030-$1.1040. Today’s high meets 50% retracement of the slide since the September 26 high near $1.1280. The 61.8% retracement of that move is found by $1.1115.  

We had envisioned the dollar to test the JPY104 area, and that is also where the 20-day moving average is found. Our idea that a break of JPY104.00 could spur a move toward JPY103.20 still seems reasonable. Recall that unlike the euro (and sterling) speculators in the CME futures are net long yen. 

Sterling extended yesterday’s gains recorded as Carney announced his intentions on stay at his post until mid-2019. It has taken out last week’s highs (~$1.2270) by a handful of ticks, but sellers appeared to re-emerge near the 20-day average (~$1.2285). It does not appear to be going anywhere quickly. Support is seen ahead of $1.22.