U.S. Dollar Choppiness Leaves Options Open
U.S. Dollar Choppiness Leaves Options Open
The U.S. dollar index is up 2.04% for the month so far
- U.S. Treasury yields are near their yearly highs, helping support the U.S. dollar.
- Nevertheless, the greenback made little progress this week, and the continued sideways chop leaves open possibilities in all directions in the short-term.
- The January FOMC meeting and January U.S. jobs report could help catalyze a move out of the recent congestion.
The past week-plus brought choppy, sideways action to the U.S. dollar.
The DXY Index is up +2.04% this year, but only +0.20% of that contribution came this week. Much like U.S. Treasury bonds, which are consolidating in familiar zones of support, the U.S. dollar does not have much going on directionally at present time.
Both bullish and bearish outcomes are on the table, particularly now that potent catalysts lie around the corner: the January Federal Open Market Committee (FOMC) meeting on Wednesday and the December U.S. nonfarm payrolls (NFP) report on Friday.
/6B British pound technical analysis: daily chart (September 2022 to October 2023)
The pound moves sideways
The British pound (/6BH4) remains in a sideways consolidation that has been in place since mid-December.
But a longer-term perspective also shows that /6BH4 has failed to return into the ascending channel in place off the October 2023, November 2023, and early-January 2024 swing lows.
Long upper wicks in recent days suggest that bulls have failed to reassert control, increasing the odds of a swing lower towards recent range support near 1.2600, though momentum is decidedly flat when looking at various indicators such as exponential moving averages (EMAs), slow stochastics, and moving average convergence/divergence (MACD).
Aside from the FOMC meeting and NFP release, the January Bank of England rate decision on Thursday offers another potent catalyst for /6BH4 in the coming days.
/6E euro technical analysis: daily chart (June 2023 to January 2024)
Where is the euro heading?
We’ve previously noted that there are two possible interpretations of euro (/6EH4) price action in the near term.
"A symmetrical triangle has been forming since July (blue lines on chart above) … [or] an ascending triangle that began forming in late-August (yellow lines on chart above).” Either way, the outlook is the same for /6EH4: it has failed in a breakout attempt and continues to head south after losing recent support.
After hitting a fresh yearly low on Friday, /6EH4 heads into next week on feeble technical footing. We cannot rule out a return to 1.0750/75 before more constructive price action resumes.
/6J Japanese yen technical analysis: daily chart (August 2023 to January 2024)
Slow start for the yen
2024 is not off to a strong start for the Japanese yen (/6JH4), but the good news is that several key events have happened. They include the December Japan inflation report, the January Bank of Japan rate decision, and U.S. data discussed previously.
None of that caused /6JH4 much damage. That said, a break below last week’s low of 0.006781 would also see the uptrend from the November 2023 and January 2024 swing lows broken, setting up a return to the 2023 low at 0.006720. If there was ever a place for bulls to stand their ground, this would be it.
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.