U.S. DOLLAR INDEX
Finally, the king found some relief. To make our life easier I coded a news synthetic asset. DXY and DXY weighted by prices and contract size. Now, able to see, the bigger picture is Dollar is taking profit mode. It’s not possible to say yet that a major trend change is coming, or it will be just a pullback. Let’s play with what we have. The reality is we can expect the dollar to strengthen. The majors are in excellent entry zone, making stop losses very cheap.
Using the new approach to create DXY we have the following finds:
EURUSD
Net positions unchanged(really), but 10k contracts cut( see open interest). Prices and positions stretched. Nobody and no money left to buy. What we can see from now is or controlled profit-taking with non-commercials doing it slowly, or fast and massive downside. The point is now how, but it will happen. I remain bearish and I will follow last week’s plan.
It’s important to note how fundamentals for the Euro Zone started to deteriorate last week, this is the fuel needed to accelerate the downside.
GBPUSD
The British pound is now neutral. I think this is related to Brexit talk restarting in the past week, looks like nobody is paying to see. Now if we look at economic data measure with the fundamental score, we will see that the UK economy is improving at the same pace that the USA economy is, so while this does not change GBPUSD will range around. I am holding a bearish view and the plan from past weeks still in play.
AUDUSD | NZDUSD
The ping-pong mode continues and the actual plan still in play! See the plan CFCT COT Forex Weekly Report.
USDCAD
What was holding USDCAD liftoff was good data coming from Canada, but this changed last week, and it already reflected in non-commercials net positions that added long 5k contracts. Don’t forget that we are exactly at the expected Low for August, a big event is needed to see the price going down from here. I remain bullish with target at 1.37.
USDCHF
As expected non-commercials started to close the shorts and add longs. This gives more confidence that the bottom is in and in the following weeks we should see USDCHF trading around 0.9426, the expected high for August.
USDJPY
This is the second week we see shorts getting closed, expected! Time to take action again. The expected high for USDJPY is 108.350, so while non-commercials continue to close shorts I see no reason for a drop. USDJPY will go up from here.
SUGAR
Sugar just gave us a very reliable short signal.
- Cot index signalizing commercials selling climax;
- Non-commercials at extreme long levels
A similar scenario happened this year on 23 of Feb. The price of sugar dropped from 15.5 to 9 USD. This comes at the exact time that we are expecting a bottom in USD. So the odds are in our favor and Sugar should drop from here.
Seasonality for prices is also indicating a big drop.
The plan we had been discussing is now starting to trigger. While it looks no big changes happened in positions, it just looks. The behavior is always the same. The bottom in USD is in. Tune your strategies to trade the right side.
Best Regards
Leo Hermoso
