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U.S. DOLLAR/TURKISH LIRA

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U.S. Dollar continues to appreciate against the Turkish Lira. Over the past three years strong uptrend pushed the cross rate from 1.8 levels to 3 levels. Long-term charts suggest the uptrend can resume in the coming weeks after a year-long sideways consolidation.

USD/TRY is possibly forming a symmetrical triangle, usually regarded as a continuation chart pattern. Price is now trading between 2.8 and 3.0 levels. Breakout above 3.0 levels will complete the chart pattern and possibly target 3.2-3.3 area. Strong support remains at 2.8 levels. If there is a decisive breakdown below 2.8 levels, symmetrical triangle will serve as a major trend reversal. In that case there will be enough evidence to favor stronger Turkish Lira.

USDTRY WEEKLY

In both cases a decisive breakout is required to confirm the completion of the year-long sideways price action.

On the daily chart price formed a possible H&S continuation, increasing the likelihood of an upward break. It is clear from both daily and weekly charts that 3.0-3.05 area is very critical for USD/TRY in the following weeks.

USDTRY DAILY

U.S. DOLLAR/CHINESE YUAN

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Once again emerging market currencies started weakening against the U.S. Dollar. Earlier update analyzed the Turkish Lira, South African Rand and Mexican Peso.  In this blog post I review the existing uptrend on USD/CNY.

U.S. Dollar/Chinese Yuan is reversing from a critical support level. Since the second half of 2015, USD/CNY has been recording higher highs and higher lows. First, a breakout above 6.26 followed by another strong breakout above 6.448, clearly established the strong dollar weak yuan trend. Last 4 months price action was possibly a pullback to the previously broken resistance at 6.448 and it might be over. Reversal from strong support area can be followed by another upward spike towards 6.65-6.70 area.

Weekly scale price chart of USD/CNY

Weekly scale price chart of USD/CNY

The daily scale chart shows the breakout from the last 4 months downward trend channel. As long as the USD/CNY remains above 6.45-6.50 area, strong USD weak CNY trend will remain intact in the second half of the year.

Daily scale price chart of USD/CNY

Daily scale price chart of USD/CNY

TRY, ZAR and MXN

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This could be a critical day for most of the emerging market currencies against the U.S. dollar. USD/TRY, EUR/TRY, USD/ZAR and USD/MXN are few cross rates worth mentioning in this update.

USD/TRY is possibly completing a rectangle chart pattern. The lower boundary of the year-long consolidation formed support between 2.75 and 2.80. A strong weekly close around 2.85 and above will likely reverse the last couple of months strong TRY trend and result in an upward move towards 3.05 levels.

USDTRY

EUR/TRY is possibly completing a symmetrical triangle. Low volatility on weekly scale suggests a strong trend period for the coming months. Again, a decisive breakout on weekly scale is required to confirm the completion of 7 month-long sideways consolidation. A weekly close above 3.30 levels will breach the resistance with enough margin.

EURTRY

Monthly scale price chart of USD/ZAR shows the importance of 13.80-14.15 area. 13.80 was the historical high that was broken on the upside. 14.15 is the 1 year-long moving average that acted as strong support since the uptrend on USD/ZAR began in 2011. Unless we see a decisive break below 13.80-14.15 area, USD should continue to gain strength against the Rand.

USDZAR

USD/MXN is another emerging market currency that found support at the 200 day moving average. 17 level was not only the long-term average but also the lower boundary of the possible 2 year-long trend channel. If USD/MXN is reversing from these levels, cross rate should rebound towards 19.5 levels in the following weeks.

USDMXN

 

USD/INR (U.S. DOLLAR/INDIAN RUPEE)

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Thanks to the Central Banks and the decision to delay rate hikes by FED, both emerging market equities and currencies had a strong rally in March. Latest recovery in equities and currencies pulled several emerging market FX to strong support levels. Such that, these are critical inflection points worth mentioning.

US Dollar / Indian Rupee weekly price chart

US Dollar / Indian Rupee weekly price chart

USD/INR (U.S. Dollar/Indian Rupee), pulled back from its historical high level at 68.80 to the lower boundary of its 2 year-long trend channel at 66 levels. Lower boundary of the 2 year-long trend channel is also the 200-day exponential moving average, in other words a strong support.

On the daily chart we can also see that MACD, a momentum indicator, reached oversold levels, though not on a buy signal yet. All these technical information suggest that unless there is a decisive breakdown below 66 levels, Indian Rupee is likely to weaken in the following weeks. In case of a rebound from the 200 day average and the lower boundary of the 2 year-long trend channel, the new trading range will be 66 and 69.

USDINR III

U.S. Dollar / Indian Rupee daily price chart

U.S. DOLLAR INDEX

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Over the past week, FED’s dovish comments resulted in U.S. dollar weakness. However U.S. dollar index started weakening in the beginning of December 2015 irrespective of FED action. Wide price fluctuation between 92 and 100 levels is likely to be a sideways consolidation.

After its strong rally from 80 levels, U.S. dollar index is taking a breather. At this stage, it is early to call for a change in trend or claim that the U.S. dollar bull market is over. U.S. dollar index should find support around 92 levels. Only after a decisive breakdown below 92 levels we can expect large-scale correction for the U.S. dollar. Until that happens I view the medium/long-term outlook on the U.S. dollar as bullish.

US DOLLAR INDEX

Weekly price chart of U.S. DOLLAR INDEX

US DOLLAR INDEX II

Daily price chart of U.S. DOLLAR INDEX

 

USD/CAD

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Weak energy and metal prices continue to put pressure on the Canadian economy and its currency. Since the beginning of 2011, Canadian dollar has been losing ground against the U.S. dollar (for earlier analysis on USD/CAD). 1.3040 was an important resistance – levels that were seen during the 2008 financial meltdown.

In the last quarter of 2015, USD/CAD breached the strong resistance at 1.3040 and possibly completed a longer-term base formation. With the last couple of week’s sharp depreciation we can conclude that there is further weakness due for 2016. Unless the cross rate falls below 1.3040 levels in the following months,  the new trading range will be between 1.3040 and 1.62.

USDCAD

U.S. DOLLAR/HUNGARIAN FORINT

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U.S. dollar remains strong against major cross-rates. Several emerging market currencies lost ground against the U.S. dollar during 2014-2015 period. Weak performance was interrupted by a medium-term consolidation over the past few months.

U.S. dollar/Hungarian Forint formed one of those identifiable consolidation chart patterns that is usually regarded as a flag or a triangle. These type of consolidation chart patterns usually resolve in the direction of the dominant trend, in this instance possibly upwards.

Breakout above 290-295 area will target the historical high around 320 levels. Expect emerging market currencies to remain weak in the following months.

USDHUF

U.S. DOLLAR/INDIAN RUPEE

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Emerging market currencies had a relief rally over the past month. U.S. dollar weakened against most of the emerging market currencies with the expectation of a possible delay on FED rate hike. Counter-trend moves in the emerging market currencies might be over and we can see another phase of weakness. An important EM cross-rate is the U.S.Dollar/Indian Rupee. Once again the cross-rate pulled back to its 2 year-long trend line support. Both the 2 year-long trend line and the 100-day moving average form support between 64.50 and 64.80. Given the oversold condition on MACD, we can expect a possible rebound from the long-term support area resulting in Indian Rupee weakness.

In the case of a breakdown below 64.50 levels we will expect Rupee to gain strength and possibly reverse the 2 year-long trend.

USDINR

US DOLLAR/INDIAN RUPEE

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China devalued its currency. This opened the door for further depreciation for the Chinese Yuan and also for currency wars between the Asian economies. Over the past two years emerging market currencies have performed poorly against the U.S. dollar. Weakness was mainly driven by commodity exporters. Now, strong U.S. dollar, weak emerging market currencies trend is spreading to Asia.

USDCNY

U.S. Dollar/Indian Rupee is preparing for a strong breakout from its 3 month-long consolidation range (rectangle chart pattern). On a larger scale, USD/INR formed a head and shoulder pattern. Both chart developments suggest weakness for Indian Rupee if the cross-rate clears 64.4 levels in the following days.

USDINR

Another weakening Asian currency is the Philippines Peso. Over the past two years, USD/PHP has been resilient though, following the breakout from its symmetrical triangle Peso has also started depreciating against the U.S. dollar.

USDPHP