On Feb, 20 2020, we recommended investors to Buy the EUR at 1.0797 – see BUY THE EUR NOW . We set a target then at 1.1750 for the bull phase.
Since then, The US dollar embarked on a significant down trend as investors started realising that the massive explosion in the Balance sheet of the FED and in the US budget deficit would ultimately lead to a de-basing of the US dollar as the world reserve currency.
We are still of the view that we have started a significant downtrend in the value of the US currency for the long term, but we have now reached a turning point for a counter-cyclical rise in the US dollar.
The bursting if the US tech bubble that started on September 2nd is now unfolding, changing the mood of the markets into a ‘risk-off’ mood and although the Chairman of the FED confirmed that US rates would stay close top zero for several years, until US employment gained traction again, he refused to announce any additional supplementary measures.
The technical configuration of the US dollar is one that points to a bull phase ahead against all currencies.
We recommend that investors take their profits in the Euro, the Japanese Yen, the Swiss franc and the Chinese Yuan in particular, and re-position themselves in favour of the US greenback.
DXY – US Dollar Index
The daily chart of the DXY shows a clear ‘saucer cup’ pattern and an imminent break above its short-term moving average that will confirm the change of trend.
The target of the first leg up is 95.9
The weekly chart shows that the USD is oversold with the RSI at 36 and the MACds delivering a tentative BUY signal
The monthly chart shows a clear attempt of the DXY to break down below the lower boundary of the upward channel that has contained the index since 2010. A failed break of this boundary in September would send the DXY back to the middle of that Channel, or a level of 102 within the next few months.
EUR – EURO
The picture could not be clearer on the EUR USD pair with a clear loss of momentum and the formation of Lowe highs in the saucer cup pattern. The target for the next move is 1.13.
The Weekly chart confirms the over extended status of the EUR with an RSI at 64 and the formation of a SELL signal on the MACDs.
The long term monthly chart shows that the 1.19 resistance levels is extremely strong and that a pull back is necessary before a new bullish campaign later in the year.
CHF – Swiss Franc
The configuration of the Swiss Franc is the same as the one of the EUR an commonality is a sure sign that the trend is reversing.
JPY – Japanese Yen
The Japanese Yen has had an interesting change of behaviour in 2020. It used to weaken in phases of ‘risk-on’ market psychology and to strengthen in phases of risk-off psychology.
Since February 2020, the relationship has reversed and the Japanese Yen appreciated in the bull phase between March and August 2020 and it is now trading on a major support line that will ultimately break but the should need a weakening phase before going higher.
CNY – Chinese RenMinBi
As we argued many times in our various publications, what we are witnessing now is a major shift in the world economic environment with the Chinese Yuan standing to replace the US dollar gradually as the world main trading and reserve curr3ency and a substantial appreciation of the Ren Min Bi.
Indeed the Yuan has appreciated markedly since May 2020 and the new long term trend is in place.
However, as the Weekly chart shows, the advance of the Yuan is getting overdone inn the shirt term and ripe for a pull back with the RSI at 23.9
Form a longer term perspective, the secular bull market in the Ren Min Bi has stated with a significant double bottom and higher low
Buy the US dollar.
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