$USD On The Ropes

A few days ago I posted several charts showing $USD at support with the quote “See what happens”.  It was either going to hold support or break down (obviously). The following charts show how those supports got smashed, most spectacularly against CHF. So was the recent USD rally nothing more than a short cover? Is this the resumption of the dollar downtrend? Price action in the last two days suggests the dollar’s ills are far from over. About the only thing in the dollar’s favour is that some pairs failed to make new swing highs, but if/when they do watch out.  (All charts 6hr candle charts)

AUD/USD

With good strength the aussie broke through downtrending resistance but failed to make a new swing high. With US markets closed on Monday I expect a quiet open to the forex week and should that be the case, the effect on the charts will be a period of consolidation, opening up the bands to give further space to the upside.

[right click on charts to open in new tab]

EUR/USD

Sovereign debt issues have continually threatened the euro but once again China expressed its white knight support this week – evident in the latest up swing. Similar to the aussie, the euro broke through downtrending resisitance with good strength and failed to make a new swing high. So some consolidation likely, especially if it’s a quiet start to the week. But if it wants to go it just may move in a big way while the yanks are away from their desks. You can thank the Chinese.

GBP/USD

The other best performer next to CHF. A super strong last three days gaining 500 pips, really pushing its extreme limits so a probable halt to the rise.

USD/JPY

The UJ was getting into its fourth week of an uptrend only to find itself hammered Thursday & Friday. This chart confirms that it is USD weakness driving all these charts because normally this pair would rise together with the above pairs. But it’s not, and that say a lot.

USD/CHF

I currently believe that this chart is more important than any other forex chart, more important even than the $US Index. This chart measures USD against the last remaining currency that is risk-free, trouble-free, and relatively debt-free. The Swiss franc.  It’s the one true alternative. And it’s at an all-time high against the dollar. But as a trading prospect for the week ahead the pair is looking very very oversold. The last time the chart looked like this was just after the earthquake and tsunami in Japan. There will be some kind of reversion to the mean, but will price bounce back or will it consolidate and wait.

It’s worth keeping in mind that we didn’t see a surge in equities during the USD sell-off as per usual. The only chart not to break resistance was SPX.

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