11/6 Today's three currencies ~ Hashimoto Mitsumasa's 'FX Outlook' ~

Today’s three currencies (Nov 6) publication date: 2017/11/06 09:02

The current dollar index is around 94.85, but since it formed a relatively large lower wick last Friday, the dollar is likely to have a firm bottom in the near term. If it clears above 95.20, it could move higher, turning toward the opposite direction of the previous H&S, and for the time being it looks to target around 96.20–96.30. Once the range is broken, the focus will be on responses, during which dollar buying will be centered mainly against the euro.

【Dollar/Yen】

(Strategy) Dollar range

(Comment)

USD/JPY has been in almost the same range for two weeks, and the body is the same as well. Since the sequence is bearish then bullish, the week will start with a firm dollar bottom. If it closes above 114.50, the final resistance around 115.20–115.40 will be tested. In that case, the dollar index is likely to aim for 96.20–96.30 after surpassing 95.30. As long as 95.30 is maintained, 114.50 will be heavy.

This week we will operate in the 112.90–114.50 yen range and take contrarian positions, but early in the week we will have fewer sells in the mid-114s. Consider adding to shorts in the 115 yen range. All short positions will be stopped at the NY close of 115.65.

Buy on dips below 113.20, with a stop at 112.55. Going forward, if NY stock prices fall sharply (about 2–3% in a day), we will close the longs immediately.

Today, in the 113.70–114.50 range, buying on dips around 113.80–113.90 with a stop at 113.45. Buy only during Tokyo time; during overseas hours, at or below 114, we will wait. Sell on a rally around 114.40 with a stop at 114.85.

【Euro/Yen】

(Strategy) Euro range, selling on rallies

(Comment)

EUR/USD has turned bearish, following a two-candle pattern after the previous large bearish candle, so the euro downside risk is greater. The weekly euro downside trend line sits in the 1.1540–1.1800 range this week.

Within this range, the 1.1616 25-week moving average is present and has been resisted for the past two weeks. Therefore, if it breaks this weekend, 1.1530 may no longer be maintainable.

Upside: shorts will be stopped if it moves above 1.1840. Until then, retracements to the range top will be sold. If it breaks through, it could reach a 1.21 double top. On the downside, breaking below 1.15 would take out the range lower bound and invite another downside attempt.

This week the euro will be sold on rallies within the above range. The resistance at 1.1730 within the range is strengthening, so early this week sell on the early 1.17x with a stop at 1.1845. If possible, add to shorts near 1.18 as well. On the downside, for now close shorts in the mid-1.15s; if it breaks below 1.15, re-sell using the 1.1530 resistance line as reference. Buy is wait-and-see.

Today in the range 1.1570–1.1660, selling on rallies around 1.1650 with a stop at 1.1745. On the downside, if it falls below 1.16, we will close the shorts. Supports are at 1.1570 and 1.1530.

【Euro/Yen】

(Strategy) Euro range, selling on rallies

(Comment)

EUR/JPY weekly closed higher, but the range near the low of two candles ago is narrow, just preventing further euro decline. However, the 131.30–131.40 support remains strong, so even if short, we will close around the mid-131s.

This week in the 131.30–133.50 range, selling on rallies around the 133s, with a stop at 133.85. If stopped, there will be a third test at 134.30–134.40, but it becomes easier to break higher; conversely, if it cannot break higher, euro highs will be capped for a long time.

This week's shorts will be closed around the mid-131s. If that strong support breaks, a move toward 128 will be attempted. After break confirmation, we will re-enter selling around the mid-131s.

Today there is immediate support at 132.30, so either sell after it breaks, or wait for a pullback in the morning. Sell on a pullback around 132.80–132.90, with a stop at 133.85. On the downside, a break below 132.10 has supports at 131.70 and 131.30 in that order. I think today the latter is unlikely.

Delivering the three-currency outlook every morning

Monthly fee 3,240 yen