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EUR/USD, USD/JPY Lead Potential USDOLLAR Topping Process

EUR/USD, USD/JPY Lead Potential USDOLLAR Topping Process

2014-12-10 12:00:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Talking Points:

- EURUSD holds post-ECB swing high, for now.

- USDJPY yet to close below daily 13-EMA.

- See the 'high' importance events on the DailyFX Economic Calendar.

Coming into this week, market was net-long $47.5 billion notional US Dollar versus G10 FX, and the weightings of the allocations reveal where the risks are in this stretched market. In particular, two pairs - EURUSD at $24.6 billion and USDJPY at $11.6 billion - comprise the bulk of the US Dollar trade at the moment.

What we've been seeing the past 24-hours hasn't been the rush of new traders taking long EUR/short USD or long JPY/short USD positions, but rather those already long USD taking profits/short JPY or short EUR covering positions.

Positioning may be a significant factor in determining the US Dollar's direction in December, despite modestly bullish seasonality in the QE era of monetary policy.

See the above video for technical considerations in the various USDOLLAR Index components - AUDUSD, EURUSD, GBPUSD, and USDJPY.

Read more: USDOLLAR Index at Risk of Near-Term Top

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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