US DOLLAR FORECAST – WEEKLY TECHNICAL OUTLOOK FOR DXY, AUD/USD, USD/CAD, USD/JPY, EUR/USD
Earlier than diving into particular person US Greenback forex pairs, we start our evaluation by observing USD value motion through the DXY Index. The DYX Index is a popularly referenced benchmark that tracks the Buck’s efficiency towards a basket of main US Greenback forex pairs. That stated, it’s helpful to know the underlying mechanics of the DXY Index earlier than making an attempt to decipher the place broader US Greenback would possibly head subsequent.
The DXY Index is concentrated closely towards EUR/USD value motion comprising 57.6% of the DXY Index with USD/JPY, GBP/USD, USD/CAD carrying a weight of 13.6%, 11.9% and 9.1% respectively. USD/SEK with a weight of four.2% and USD/CHF at three.6% make up the remaining composition.
US DOLLAR INDEX PRICE CHART: WEEKLY TIME FRAME (OCTOBER 17, 2016 TO NOVEMBER 15, 2019)
Chart created by @RichDvorakFX with TradingView
Shifting focus again to USD value motion we see that the US Greenback Index has, on steadiness, drifted decrease during the last 5 buying and selling days. This follows the prior week’s spectacular rebound. Although I famous within the US Greenback Worth Volatility Report printed final Friday that that whereas the claw-back try by the US Greenback was notable, the Buck confronted an intimidating zone of confluent resistance across the 98.25-98.50 stage. Such nonetheless appears to be the case.
On the similar time, the 97.00 deal with will look to proceed bolstering the US Greenback, which is highlighted by the 50-week easy transferring common and bullish trendline prolonged via the September 2018 swing low and better swing low printed this previous June. A extra instant space of confluent help close to the 98.00 mark is recognized by the 61.eight% Fibonacci retracement of the US Greenback’s buying and selling vary since its January 2017 peak.
Although the latest bounce within the DXY index may even have a elementary rationalization with the US Greenback monitoring the autumn in Fed fee lower odds as US-China commerce conflict danger seemingly recedes. This will not final lengthy, nevertheless, with latest stories crossing the wires that US-China commerce talks have hit a snag as the 2 nations battle to finalize a partial commerce settlement.
AUD/USD PRICE OUTLOOK – NEUTRAL
Whereas not included within the DXY Index, conserving tabs on spot AUD/USD value motion will likely be important with headlines on US-China commerce talksentrance and middle.
The technical outlook for AUD/USD is impartial with spot costs at present wedged between the Aussie’s broad downtrend towards the US Greenback – relationship all the way in which again to July 2011 – and its short-term ascending help line connecting the sequence of upper lows since early October.
Although latest weak point in spot AUD/USD costs has pushed the forex pair under its 20-week SMA and confluent help highlighted by the 23.6% Fibonacci retracement stage of its 2019 buying and selling vary.
CHART OF AUD/USD: WEEKLY TIME FRAME (MAY 20, 2018 TO NOVEMBER 15, 2019)
This growth may exert downward stress on the Aussie-Greenback going ahead, however the fast rebound again above the Zero.6800 deal with final week doubtless supplied encouragement to AUD/USD bulls. Alas, AUD/USD might keep a tough buying and selling vary between Zero.6800-Zero.6900 till there’s a decision above or under these important technical ranges.
A breach of the Zero.6800 deal with once more would possibly result in a retest of final week’s lows, nevertheless, and will open up the door for AUD/USD bears to focus on the Zero.6750 stage. Conversely, topping the Zero.6900 value zone has potential AUD/USD bulls to set their eyes on the Zero.7000 mark.
USD/CAD PRICE OUTLOOK – BULLISH
USD/CAD value motion will doubtless linger in foreign exchange merchants’ crosshairs following the latest launch of weak Canadian jobs and housing information and an upcoming speech from BOC Governor Poloz in addition to a high-impact Canadian inflation report due subsequent week.
These occasions may very properly decide if the BOC will capitulate and lower charges, which is able to doubtless dominate USD/CAD over the close to time period. Nonetheless, spot USD/CAD costs have notched a powerful rally during the last three weeks and speaks to the US Greenback’s sturdy underlying tailwind relative to the Loonie.
CHART OF USD/CAD: WEEKLY TIME FRAME (JUNE 17, 2018 TO NOVEMBER 15, 2019)
The surge in spot USD/CAD ran right into a notable stage of technical resistance, nevertheless, and is highlighted by the 38.2% Fib of its buying and selling vary etched out thus far this yr. This zone of confluence round 1.3270 can also be underpinned by 200-day SMA.
But, the might be potential for a retest of this stage and 1.3300 deal with. This is likely to be facilitated by the 1.3200 stage offering a powerful diploma of buoyancy for the US Greenback whereas the approaching bullish MACD crossover speaks to the potential for sustained upward momentum.
USD/JPY PRICE OUTLOOK – NEUTRAL
The US Greenback may discover technical decision towards its JPY counterpart very quickly with this sentiment-geared and rate of interest delicate foreign exchange pair (because of its in style use within the forex carry commerce) coiled tightly between rising and falling trendlines.
Except for US-China commerce talks, the discharge of FOMC minutes from the October Fed assembly has potential to offer USD merchants with elementary conviction to check the boundaries of its month-to-date buying and selling vary.
Though I famous this previous week that the each day USD/JPY chart eyed a looming reversal with a break in bearish rising wedge sample in focus, the lately developed rising help line on a weekly spot USD/JPY value chart appears to nonetheless be intact.
CHART OF USD/JPY: WEEKLY TIME FRAME (MARCH 28, 2018 TO NOVEMBER 15, 2019)
Nonetheless, the 50-week SMA and 109.00-109.50 zone of confluent have potential to thwart a sustained upside try.
Whereas the 108.00 deal with will doubtless look to maintain spot USD/JPY costs buoyed, a cloth breakout under the ascending help line prolonged via the sequence of upper lows recorded on August 25, October 06 and November 01 may open up the door to check its 20-week SMA.
On that notice, a drop within the RSI beneath 50 and towards ‘oversold territory’ may counsel a rising bearish bias.
EUR/USD OUTLOOK – NEUTRAL
Final however not least, EUR/USD outlook this week as spot costs gravitate across the 23.6% Fibonacci retracement of its 2019 buying and selling vary, which may hold the world’s most liquid forex pair comparatively anchored.
That stated, the ECB assembly minutes launch from the central financial institution’s most up-to-date financial coverage replace – along with a speech from new ECB President Christine Lagarde – may present sources of volatility for EUR/USD value motion subsequent week.
CHART OF EUR/USD: WEEKLY TIME FRAME (MAY 6, 2018 TO NOVEMBER 15, 2019)
The 1.1000 deal with comes into focus as instant technical help and if this stage offers means it may open up the door for EUR/USD bears to focus on year-to-date lows. Conversely, spot EUR/USD value motion may lengthen final week’s rebound from the previous week’s steep selloff.
Above the downward sloping 20-week SMA, which may exert downward stress on EUR/USD going ahead, confluent resistance across the 1.1150-1.1175 space is underscored by the 38.2% Fib.
FOREX VOLATILITY & US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (JUNE 19, 2018 TO NOVEMBER 15, 2019)
Chart created by @RichDvorakFX with TradingView
I detailed in the latest USD Worth Volatility & Implied Buying and selling Ranges report a number of the main elementary headwinds confronted by the US Greenback – together with fading foreign exchange volatility. FXIVX, a forex volatility index equally weighted to EUVIX, BPVIX and JYVIX (Cboe’s 30-day implied volatility indices on the Euro, Pound and Yen respectively), displays the plunge in volatility throughout the foreign exchange market as broader danger urge for food runs rampant.
A strengthening correlation between the US Greenback Index and forex volatility – mixed with the latest nosedive in FXVIX – suggests ache might be forward for USD value motion. Then once more, a pointy uptick in volatility appears overdue amid a rising danger of complacency, which might doubtless spur demand for the US Greenback in flip if one other surge in volatility does in truth unfold.
For complete elementary and technical perception on the US Greenback, obtain our free 4Q-2019 Forecasts and Buying and selling Guides.
— Written by Wealthy Dvorak, Junior Analyst for DailyFX.com
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