Forex Weekly Report 09-20-2019

Bullish Trend is starting on USD! That’s the signal that caught my attention when I opened the COT Tool and after some inspection on the COT Data and one thing is blinking in my screen:

9739 were added to the long side on the US Dollar Index

and the more interesting to note is this net position difference was created by short contracts being closed, bears USD closing the bets, this alone makes me think we will see USD higher next week, but I have more reasons the believe that 100 is about to happen.

You can see the green circles the massive non-commercial shorts being cut increasing the long exposure and at the same decreasing the nonspreading open interest what can increase the buying power for the commercials as we saw in a previous article about gold bearish reversal. This gives me the conviction that those short are not in cash and ready to bid and propel USD higher.  You also will note that since 30-07-2019 short positions are being cut.

This alone had convinced me a take a long position on USDX, but now look this, a very strong buy signal for 2-YEAR U.S. TREASURY NOTES.

A rising yield is dollar bullish. A falling yield is dollar bearish.

Let’s add to the fact that US core inflation topped expectations again in August and the USD Liquidity is becoming tighter as the Treasury rebuild its crisis account at the Fed. (Tks Nordea Guys).

I took a small long position on USDX at the moment the Cot Data was out and I am looking to add if it dips adding higher with the trend.

I really think  USD is the only game in town and let’s play it. Ok but if I don’t have the option to trade the USDX? You can play the same game sell rallies on EURUSD like in this chart. The most important is do not try to catch the top on USD, it will no happen now and it’s not a prediction it’s data telling us this.

USDJPY – BEARISH BIAS

USDJPY still playing the bearish game, despite the last 3 weeks recovery, I see it as a pullback only. From the point of view of technical analysis, UJ still has one more leg down, unless we have 109.400 taken. In the chart, both trend lines I printed have exactly the same side this way you can see that the move expected lead us exactly to a big demand zone. This last zig-zag bring prices exactly to a previous demand zone that worked as supply zone this time, movement is complete and UJ is ready to drop. A more inquisitive reader may ask “Ok, how USDJPY can go down if you just told US that DXY is going up?” That’s, in fact, a good question, but have in mind that the constituents of the index that made the price of it not the opposite with that said to have in mind that UJ has a small weight on the index.

What really moves DXY index is EUR!

  • Euro (EUR), 57.6% weight
  • Japanese yen (JPY) 13.6% weight
  • Pound sterling (GBP), 11.9% weight
  • Canadian dollar (CAD), 9.1% weight
  • Swedish krona (SEK), 4.2% weight
  • Swiss franc (CHF) 3.6% weight

If you look in this chart on the circled area you will see that both Net positions and Open Interest for commercials and non-commercials are not even close to exhausting their buying/selling power capacity.

 

Here you can check the last cot Signals for USDJPY and you will see the last cot signal is bearish!

 

USDJPY Spreadsheet mode from the cot tool

 

EURUSD – BEARISH BIAS

EURUSD is playing the bearish side for a long time and to be honest, is hard to find reasons to buy it, some may argue that the US economy is diving into a recession, or Trump is complete screwing us economy is the trade war, ok even if I agree with all of this, you must consider some things and first thing comes first. Europe economy is in a spiral that even paying for people to borrow money the inflation does not appear and no signal of growth can be seen, so comparing both economies I still prefer to buy the United States rather than Europe, sell EUROPE BUY the this looks like a EURUSD short for me. The second point is the interest rates every trade that you fund using USD you will pay for carrying it, if you buy EURUSD, your broker will charge you daily swaps, if you short EURUSD your broker will pay you daily swaps, this is one thing nice about pepperstone they have very competitive swap rates. I can stress several scenarios with this, but just one more, you spot an opportunity to buy NOK, which currency will you choose to fund EUR or USD? If you use EUR you get paid, if you use USD you have to pay! If you short EURNOK you get positive swaps if you short USDNOK you have to pay to hold the positions.

EURUSD is a sell on rallies

The Stochastics cot signal is the strongest signal and EURUSD is about to have that signal triggered again, you also will see that current net position increased for the short side. Folks, there is no reason to look for buying setups, focus your trading and setups for the short side.

 

Here you can check the last cot Signals for EURUSD and you will see the last cot signal is bearish!

EURUSD Spreadsheet mode from the cot tool

 

GBPUSD- ABOUT TO BECOME BULLISH

GBPUSD has its own history with the Brexit headlines, some say that trading it right now is a gamble, I have a different opinion. What I see is big speculator(non-commercials) very short, BUT since the beginning of August, they are closing their short with an average of 4k contracts a week, if this pattern continues we may see in the following weeks a very strong move to the upside caused by a massive short squeeze on big speculators.  COT Index and Stochastics still bearish, but they are already moving out of this zone and I don’t want to be the last one and turns off the light.

I prefer LONG setups on GBPUSD

COT Indicators moving out of the bearish zone

GPBUSD Past Signals

GBPUSD Spreadsheet mode

That’s it my friends! I hope this can add value to you in some way. If you have any kind of doubts or questions please comment here, I am looking forward to replying to you.

“Hey Leo wait, I want to see your analysis for more pairs”

Very well my friend, join me in my chatroom.

Have a great weekend you all!

My best regards,

Leo Hermoso

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Comments (2)

Very interesting analysis Leo thank you

You’re very welcome my friend!

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