Market Update – June 10

DXY 4 HOUR

Stephen Roach, former Morgan Stanley economist and currently employed by Yale, published A Crash in the Dollar Is Coming yesterday.  He may be correct but these types of articles are usually published at near term price extremes (in this case a USD low).  Technically, this is the perfect spot (December low) for a bounce.  Also, DXY made a slight new low today but EURUSD did not make a new high.  This non-confirmation is typical at turns.  Back to 98.27 or so wouldn’t be a surprise.  Finally, consider the extreme short term sentiment readings (DSI readings from Monday) in front of FOMC on Wednesday.  The narrative heading into FOMC is that there is no limit to the Fed’s balance sheet.  What else can they say that would ‘surprise’ markets in that direction?  Risk for tomorrow seems like a classic ‘sell the news’ event.

SPX – 91

Nasdaq – 93

CAD – 89

AUD – 90

NZD – 95

Copper – 86

6/4 – The lower USD call is getting popular as evidenced by FT article today – Wall Street strategists say dollar could be set for ‘dramatic’ falls.

I do believe that the USD is in for a ‘dramatic’ fall (61.8% retrace of the 2001-2008 decline has been resistance for years and the spike high in March failed at the line off of the 2002 and 2017 highs) but these types of headlines tend to appear near short term pivots.  Ideal resistance is 98.50s, which is the underside of the center line of the channel from the 2011 low (see daily chart below).

EURUSD 4 HOUR

Not much to add regarding EURUSD.  Price dropped to noted support (1.1239) and then bounced into the high volume level.  Non-confirmation between EURUSD (never took out Friday’s high) and DXY (took out Friday’s low today) is a negative.  Finally, the rally from 1.0775 can be counted in 5 waves (truncated 5th wave).  The implication is that at least a 3 wave pullback unfolds.

6/7 – EURUSD reversed lower on Friday.  My near term view is for a lower EURUSD but I’ll be watching DXY closely for resistance from the underside of the median line of the channel from the 2011 low (see 6/4 post for DXY analysis) in order to return EURUSD bullish.  Resistance for short entry is the high volume level from Thursday at 1.1344.  Downside levels to keep in mind early this week are 1.1239 and 1.1148.

USDSEK 4 HOUR

USDSEK broke down and is testing the lower parallel of a steep channel…which is a good spot for a bounce.  Resistance should be the underside of the former support line off of the 2018 low.  This line intersects short term channel resistance late next week near 9.50.  This is an important chart to know for the next USD short entry.

5/28 – USDSEK is testing a massive level defined by the lower channel line from the January 2018 low and median line of the bearish channel from the high.  A break would be significant and likely lead to a collapse.  That said, support is support until broken (and then it becomes resistance).  USDSEK has a tendency to lead broader USD moves so keep an eye on what happens here.

USDJPY 4 HOUR

USDJPY could bounce near 107.50.  If it does, then I’ll zoom in on short term charts in an attempt to identify the end of a corrective bounce but keep 108.75-109.00 in mind for resistance.

6/8 – USDJPY plunged today.  Price could bounce from the lower parallel of the short term fork near 108.00.  Proposed resistance is the year open and center line at 108.75-109.00.  Seasonal tendencies have turned down and the rally from the May low is in 3 waves.  The implication is that the rally is complete as a correction and that price is headed for a break of the May low of 105.99.

AUDUSD 4 HOUR

AUDUSD made a bearish outside day today after taking out the 12/31 high at .7032.  I’m looking lower with focus on the well-defined .6685.  The center line of the channel shown is possible support near .6855.

6/8 – AUDUSD daily RSI finished above 80 today.  This has happened a handful of times over the last 20 years; January 2018, July 2007, November 2004, January 2004, and June 2002.  All instances occurred at or just before highs.  Price is also testing the 12/31 high at .7032.  This zone was also important from October 2018 to July 2019.  I need SOMETHING to work with though for an entry….stay tuned.

USDCAD 4 HOUR

If USDCAD continues to bounce then the center line at 1.3600 is still in line for resistance.  From an Elliott standpoint, the bounce would fit as a small 4th wave.  In other words, USDCAD would drop once more to complete the 5 wave decline from 1.4141.  A downside level of interest to keep in mind then is 1.3329.

6/8 – USDCAD is nearing the bottom of the noted zone for support.  The lower parallel of the channel from the March high is right here too.  I’m an alert for a reversal higher.  Proposed resistance is still the median line from the bearish channel.  That’s currently about 1.3600 (just above the short term pivot high at 1.3572).

AUDJPY 4 HOUR

If AUDJPY is going to continue to pull back after taking out the December high, then resistance should be near 75.90.  This is the 75 line of the channel from the March low.  This line was support last week so watch it for resistance now.  The downside level of interest is the lower parallel near 72.80.

6/7 – There isn’t much to add regarding AUDJPY.  Daily RSI is nearly 82 now.  Readings above 81.5 are marked with magenta dots.  The most recent reading was in September 2014.  Readings in December 2012 and January 2013 did NOT mark important highs although minor reactions did occur.  The only other times that RSI was above 81.5 was December 2005 (major high) and January 2002 (minor high).  Similar to USDJPY, I’d like to see early week price action before plotting an entry.