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Bad month for DXY but index ends near potential support

August 1, 2020

The slide on the US$ continued last week but the Index will close the month near a potential support zone from a multi-year trend line. Traders will need to watch this region in coming sessions in case the index uses this support to take a pause, or to even try and carve out a pullback. This would then have obvious impacts on Gold and numerous FX pairs. Recall that it was back on July 11th when the new FX Index alignment alerted us to a potential bullish run on the EUR/USD and this pair subsequently rallied for 500 pips. However, trends don’t run in straight lines unabated so traders need to be cautious here as the DXY rests at potential support.  Next week brings US NFP so watch to see how this result impacts the US$; there has been no ‘Flight to Safety’ activity as yet but that could change too.

 

EUR/USD 4hr: there has been a run worth over 500 pips since my July 11th post advising traders to watch for any bullish breakout on this Flag pattern. The 13-year bear trend line will be in focus here now:

 

DXY

DXY monthly: a bearish monthly candle but note the print near the 10-year support trend line:

 

DXY weekly: the long tail on this weekly candle reflects how buyers stepped in:

 

DXY daily: note the bullish-engulfing candle for the last day of the month:

 

DXY 4hr: watch for any new triangle breakout: up or down!

 

EURX

EURX monthly: a large bullish monthly candle here and note the break of the 13-year bear trend line:

 

EURX weekly: the weekly candle gapped higher and will close as an indecision Spinning Top and just under the 61.8% fib level so watch this region for any new make or break:

 

EURX daily: an indecision ‘Inside‘ candle to close out the last day of the month. This bullish Cup ‘n’ Handle looks to be in play though:

 

EURX 4hr: watch the 118 level for any new make or break:

 

 

FX Index Alignment: The FX Indices still remain aligned for classic risk-on for currencies so watch to see if this persists and has any further impact on the EUR/USD. This pair has added over 500 pips since I alerted about this bullish potential, in advance, back on July 11th:

  • EURX: is above the 4hr Cloud and above the daily Cloud so aligned for STRONG EUR$ price action.
  • USDX: is below the 4hr Cloud and below the daily Cloud so aligned for WEAK US$ price action.

 

 

Calendar: there is a lot of high impact data next week but Friday’s US jobs data will likely be in great focus given ongoing concern about the economic impact of Covid-19 and especially after last week’s disastrous US GDP print.