We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Bullish
USD/JPY
Bullish
Gold
Mixed
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Bullish
More View more
Real Time News
  • The $USD faces selling pressure against the Malaysian Ringgit and Philippine Peso. More losses may be in store in $USDMYR as $USDPHP descends through rising support from 2013. Get your market update from @ddubrovskyFX here: https://t.co/t3kmFpmg1w https://t.co/miBrgxmtkA
  • $AUDJPY has launched yet another attempt to breach a multi-month downward trend resistance after failing to break above it in September. Will two consecutive defeats precede a reversal lower? Find out from @ZabelinDimitri here: https://t.co/b3nWUu0QZy https://t.co/Lj0ZSWOdp1
  • The #Euro has breached resistance guiding it lower for nearly four months, setting the stage for gains. Any near-term rise is unlikely to derail the long-term downtrend, however. Get your Euro market update here: https://t.co/gl9VRc3XEp https://t.co/K2mQuEolQc
  • We just closed out the $DXY's worst weekly tumble since January 2018...and it still hasn't cleared this frustratingly restrictive channel https://t.co/cJedpn0g8D
  • Heads Up:🇬🇧 GBP U.K. Government Sits to Discuss Brexit due at 23:01 GMT (15min) https://www.dailyfx.com/economic-calendar#2019-10-18
  • “Gold Price Charts on Cusp of Major Breakout” - via @DailyFX Check out the preview of this week’s technical outlook for $XAUUSD below. Link to full analysis: https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/10/18/xau-usd-xauusd-gold-price-charts-on-the-cusp-of-a-major-breakout.html https://t.co/7X6nkafn7D
  • With a #Brexit deal in focus and the US-China trade war de-escalating, G10 currencies’ central banks’ rate cut odds have receded. Get your market update from @CVecchioFX here: https://t.co/k7XkyKD7iW https://t.co/vaZV1vSWjP
  • ECB President Lagarde says Trump should stop criticizing the Fed with tweets -BBG
  • Politics continues to dictate volatility in the $GBP with option premiums at the highest since the 2016 EU referendum. Get your market update from @JMcQueenFX here:https://t.co/cpApmLPBgR https://t.co/vwpmpyZOam
  • The US Citi Economic Surprise Index dropped to 8 today, down from 44.9 on September 26th https://t.co/y3Jk0TUhJk
DXY Index Enters Fourth Day Down, Threatens False Breakout

DXY Index Enters Fourth Day Down, Threatens False Breakout

2018-08-21 12:07:00
Christopher Vecchio, CFA, Sr. Currency Strategist
Share:

Talking Points:

- The US Dollar is in the midst of its worst stretch since the end of March, pacing for its fourth consecutive day of losses.

- Undering the greenback has been commentary from US President Trump, who suggested that Fed interest rate policy was too tight.

- Retail traders remain net-long GBP/USD, but have flipped to net-short EUR/USD overall; the outlook for the US Dollar is mixed.

See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides

The US Dollar (via the DXY Index) is on pace for its fourth day of losses after US President Donald Trump poignantly criticized the Federal Reserve for its efforts to tighten monetary policy, while at the same time suggesting that both China and the EU are taking efforts to devalue the Yuan and the Euro, respectively.

While it isn't typical for sitting presidents to criticize Fed policy, this wouldn't be the first time that US President Trump hasn't opined on monetary policy. Of course, this seemingly puts the Fed in a bind, whereby if they don't raise rates in September as markets are pricing in - currently a 92% chance, per Fed funds futures - then they will be seen as having sacrificed their independence.

But the commentary from US President Trump in the Reuters interview comes at a pivotal time for the US Dollar, which is facing down the August FOMC meeting minutes tomorrow and the Jackson Hole Economic Policy Symposium on Friday and Saturday. If anything, concerns over US-instigated trade wars with China and the EU were already likely to be top topics this week; the comments revealed today will only intensify the spotlight on the potential currency and trade wars unfolding.

For now, with the US Dollar pulling back thanks to the US president, higher yielding currencies and risk correlated assets are performing well this morning. In an environment in which there has been a clear grab for US Dollars - a knock-on effect of the turmoil in emerging markets - a weak US Dollar is seen as a positive development for risk assets. In effect, the greenback is acting like the quintessential safe haven currency: rallying when stocks fall, falling when stocks rally.

DXY Index Price Chart: Daily Timeframe (June 2017 to August 2018) (Chart 1)

DXY Index Enters Fourth Day Down, Threatens False Breakout

As price action has unfolded in recent days, it's become increasingly clear that a false breakout scenario is being threatened by the DXY Index (largely due to the 'inorganic' nature of the dollar's rally). The daily 8- and 13-EMAs, which the DXY Index had closed above everyday in August, were both lost yesterday. Althought still in positive territory, daily MACD has issued a sell signal; Slow Stochastics are quickly losing momentum.

A false breakout scenario would be underway should the DXY Index close back below 95.53, the June 21 bearish daily key reversal and June 27 to 29 evening doji star candle cluster highs. In turn, if the largest component of the DXY Index, EUR/USD (at 57.6%), sustains a move back above 1.1510, then there is ample reason to believe that the recent US Dollar rally is finished.

Read more: FX Week Ahead: ECB & FOMC Minutes, Japanese CPI, Jackson Hole

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

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

Follow him on Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.