Currently Stuck In A Currency Rut
The US Dollar has been sore point for many people in the market, and also the reason for the rally in stocks and commodities. Correcting from close to 102, DXY's fall towards 89 has been brutal. Notice how this is very similar to the correction we saw in 2017.
If there was anything that could ruin the current rally in stocks and commodities, it's a Dollar rally. While there is no evidence suggesting that the Dollar will rally going forward, this seems like a logical place for the DXY to bounce back with resistance turning into support at the level of 90.
Gotta keep a close eye on this one!
Click on chart to enlarge view.
Up next we have the EURUSD that broke above the downward sloping trendline with an immediate overhead supply zone present at 1.25. A move above this could take the currency pair higher towards 1.40. Although the breakout is in place it is the follow-through that we're waiting for.
A 12-year downtrend has been breached. That's a long time! Will the breakout hold its ground? Let's see what the EURUSD pair does going forward.
Let's take a look at one more global currency pair before we dive into the Indian currency pairs.
AUDJPY is a popular risk-on risk-off indicator, which as can be seen from the chart below, has been making higher highs and higher lows. This bodes well for the stocks! Currently halting at the resistance of 80.30, a breakout could take the price towards 84.20.
However, if there was a point for pause, this would be a perfectly logical place for that to happen. Does that mean stocks across the globe will correct? Not necessarily. We'll need more evidence for that.
Now let's look at some Indian currency pairs.
USDINR looks like it could slide lower going by the growing strength in the Rupee against the Dollar. The current set-up does warrant a steep correction in this ratio if 72.90 is breached. In that case, we could expect to see USDINR test levels of 68.
EURINR did break out above 88 but hasn't seen a strong follow-through in trend so far. Our target of 101 can be expected so long as the ratio remains above 88. Positive sentiment in EURUSD would spill over in this currency pair as well.
JPYINR continues to scrape against the resistance of 0.72. When this narrow consolidation breaks out, it is going to explode! You try to push a beachball below the water, and it'll bounce back right up with double momentum. That is what will happen here too. We're just waiting for that moment. The difference being, we are waiting to get an indication of the direction of the breakout, unlike in the case of a beachball.
GBPINR is messy at the moment. Our bullish thesis remains intact as long as the price trades above the level of 97, whereas a move below it, would negate the thesis.
Not a lot going on at the moment in Currencies, but there are several charts that we are observing closely in order to analyse the impact they could have going forward. Patience is key. So is asset allocation.
Thanks for reading and please let us know if you have any questions.
Allstarcharts Team