US Greenback Outlook:Non-Main USD-crosses Nonetheless Look BearishThe April US non-farm payrolls report was the worst case state of affairs for th
US Greenback Outlook:
Non-Main USD-crosses Nonetheless Look Bearish
The April US non-farm payrolls report was the worst case state of affairs for the US Greenback: the consequence has been a mixture of decrease nominal bond yields and better inflation expectations, curating an surroundings of falling actual yields. Though chatter in regards to the Federal Reserve unveiling a taper timeline within the coming months was rising, the narrative across the US Greenback has dramatically modified initially of Could.
The weak US Greenback surroundings comes in opposition to a nonetheless interesting macro mixture of secure world bond yields, in any other case typically bettering world financial knowledge, and surging commodity costs. The dollar is seen squarely as low yielding funding foreign money in the mean time, permitting for different currencies with extra interesting near-term prospects – or proxies to these with extra interesting near-term prospects, maybe tied to commodities – to achieve floor.
Accordingly, because the calendar turns to the center of Could, every of USD/CHF, USD/NOK, and USD/SEK charges retain their bearish potential. Each USD/CHF and USD/SEK have traded beneath their intrayearly uptrends, whereas USD/NOK’s bear flag breakout stays on monitor.
USD/NOK RATE TECHNICAL ANALYSIS: WEEKLY CHART (Could 2014 to Could 2021) (CHART 1)
Wanting on the weekly timeframe, USD/NOK charges have made a decisive break beneath bear flag assist, and in context of the previous transfer, which was a gentle decline from the March 2020 excessive, suggests deeper losses are forward. By the way, the bear flag breakout occurred a number of months after USD/NOK dropped beneath the ascending trendline from the Could 2014 and March 2018 lows (which briefly held as assist in August 2020 earlier than giving approach in November 2020).
It’s been beforehand famous that “the most important signal of confidence USD/NOK charges would possibly provide {that a} bearish breakout is gathering tempo could be if the pair achieved a weekly shut 8.2453, the 61.8% Fibonacci retracement of the Could 2014 low/March 2020 excessive vary.” This has certainly occurred; extra losses seem more likely to collect tempo by way of the rest of 2Q’21.
USD/SEK RATE TECHNICAL ANALYSIS: WEEKLY CHART (August 2016 to Could 2021) (CHART 2)
Within the prior replace, it was famous that “USD/SEK charges have pulled again sharply over the previous two weeks, failing to return into the rising parallel channel drawn from the December 2016 and March 2020 highs once more the February 2018 and August 2020 lows. In failing to retake the channel in latest weeks, USD/SEK additionally misplaced its uptrend from the February and March 2021 swing lows…USD/SEK charges might quickly be heading again in direction of the 50% Fibonacci retracement of the March 2014 low/March 2020 excessive at 8.3951.”
USD/SEK charges established a bearish weekly exterior engulfing bar final week, whereas breaking beneath the aforementioned 50% Fibonacci retracement and the uptrend from the January and February swing lows. In breaking beneath this confluence of technical assist, USD/SEK charges might have provided a transparent sign {that a} prime has been established; value motion initially of the 12 months was the re-test of the bearish breakout from the multi-year rising channel.
Momentum is more and more bearish on the weekly timeframe. USD/SEK charges are beneath their weekly EMA envelope, which is almost aligned in bearish sequential order. Weekly MACD is nearing a bearish crossover beneath its sign line, whereas weekly Sluggish Stochastics are declining in direction of oversold territory. A deeper setback could also be forward.
USD/CHF RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to Could 2021) (CHART 3)
USD/CHF charges have made a significant bearish flip in latest days, first having misplaced the uptrend from the January and February swing lows final Thursday after which a decisive follow-through across the April US labor market report on Friday. Notably, USD/CHF charges have dropped beneath three significant Fibonacci retracements: 23.6% of the 2019 excessive/2021 low vary at 0.9107; 61.8% of the 2021 low/excessive vary at 0.9031; and the 23.6% of the 2020 excessive/2021 low vary at 0.9027.
USD/CHF charges are beneath their every day EMA envelope, which is in bearish sequential order. Day by day MACD’s drop is accelerating beneath its sign line, whereas every day Sluggish Stochastics are digging deeper in oversold territory. The trail of least resistance is decrease within the near-term.
IG Consumer Sentiment Index: USD/CHF Price Forecast (Could 10, 2021) (Chart 4)
USD/CHF: Retail dealer knowledge exhibits 79.91% of merchants are net-long with the ratio of merchants lengthy to brief at 3.98 to 1. The variety of merchants net-long is 5.46% increased than yesterday and 6.12% increased from final week, whereas the variety of merchants net-short is 9.68% increased than yesterday and 25.11% decrease from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests USD/CHF costs might proceed to fall.
Positioning is much less net-long than yesterday however extra net-long from final week. The mixture of present sentiment and up to date adjustments provides us an additional blended USD/CHF buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Foreign money Strategist
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