Has the dollar reversed or will it go higher?
The DXY seems to have broken its parabolic trend and an essential trendline; however, it has simply retested a critical breakdown level and hasn't closed below the Q2 highs. Until the market closes below the Q2 highs or, more precisely, below the 2010s (previous decade's) highs around 103-105, then it is tough for me to say that the market has indeed reversed. The overall trend is up for the DXY, and the recent dip might have been an excellent buy-the-dip opportunity. I am neutral because a cluster is currently rejecting it for resistance (monthly pivot + diagonal resistance). Of course, someone could look for some shorts on the USD (DXY) and longs for other fiat currencies. I will talk about some below:
EURUSD is looking very ugly. The market failed to retest a significant breakdown zone, which will likely never do. The 1.03-1.04 support held since 2017 and the fact that that support level was tested several times this year before breaking lower makes it even more critical. The other day the market swept the highs and got rejected lower, making the downside even more likely. Any upside will likely be a short-term bound only, as the bounce was mainly due to psychological reasons. The market got oversold and crossed the round number of 1$, which was a significant psychological number for many traders. Many speculators rushed to short because they thought a collapse would follow once parity broke. Therefore this seems like a short squeeze that will reverse lower. Of course, we should not forget the energy crisis in Europe, which appears to be worsening as Russia will most likely cut gas supplies to Europe.
GBPUSD seems to be trading in a massive range since the Brexit vote. This looks like accumulation; however, I feel it will go lower. I can't see how the Euro will go lower, yet the Pound will go higher. In the short term, I can see the market going higher, maybe towards 1.24-1.25 and top there, or even 1.29-1.30, which seems less likely for now.
USDJPY has had some pretty wild moves, and in my opinion, Japan is best positioned to deal with the upcoming deflation. In the past, I talked about how the Yen would do very well in a deflationary situation and the monthly close. If the close was above 135, I expected higher prices; if the close was below lower. As the market closed above, it rallied to 139-140 but quickly crashed lower. Once it closed below 135, it went straight down to 130 and bounced hard. The volatility on USDJPY is crazy, but I think things will cool down soon. The market will most likely chop in this area for a while. I see further upside in the short term, followed by another significant drop and potentially a bottom around 128-130.
EURUSD is looking very ugly. The market failed to retest a significant breakdown zone, which will likely never do. The 1.03-1.04 support held since 2017 and the fact that that support level was tested several times this year before breaking lower makes it even more critical. The other day the market swept the highs and got rejected lower, making the downside even more likely. Any upside will likely be a short-term bound only, as the bounce was mainly due to psychological reasons. The market got oversold and crossed the round number of 1$, which was a significant psychological number for many traders. Many speculators rushed to short because they thought a collapse would follow once parity broke. Therefore this seems like a short squeeze that will reverse lower. Of course, we should not forget the energy crisis in Europe, which appears to be worsening as Russia will most likely cut gas supplies to Europe.
GBPUSD seems to be trading in a massive range since the Brexit vote. This looks like accumulation; however, I feel it will go lower. I can't see how the Euro will go lower, yet the Pound will go higher. In the short term, I can see the market going higher, maybe towards 1.24-1.25 and top there, or even 1.29-1.30, which seems less likely for now.
USDJPY has had some pretty wild moves, and in my opinion, Japan is best positioned to deal with the upcoming deflation. In the past, I talked about how the Yen would do very well in a deflationary situation and the monthly close. If the close was above 135, I expected higher prices; if the close was below lower. As the market closed above, it rallied to 139-140 but quickly crashed lower. Once it closed below 135, it went straight down to 130 and bounced hard. The volatility on USDJPY is crazy, but I think things will cool down soon. The market will most likely chop in this area for a while. I see further upside in the short term, followed by another significant drop and potentially a bottom around 128-130.
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