Dollar Index Update

[Bulldog]

Tuesday Model Forecast
The dollar has given us back a little ground since this morning and we're not sitting quite as deep in the red as we were earlier. The dollar is seeing a number of different resistance levels (all the way out to daily studies ) converging on at this level.

24hr Forecast: Short dollar into Tuesday (next update Tuesday 5:00GMT)
48hr Forecast: Short dollar into Wednesday. (nest update Tuesday 22:00GMT)

Technical Outlook
Looking at the 4hr chart we can see that today's price action pushed us up to the 100EMA and just above fib resistance. If the Fed comes out Hawkish tomorrow (or at least sound it - which they have pretty consistently) we'll probably pop up to the resistance bands. Technically there really is very little to indicate one way or the other; MACD is nearly centered and the fast line is touching the slow line in this time frame. RSI is just above its center line but has a mile to run before it tops out.

Tomorrow could light a fire in either direction; we've been centered in this range for several days and a move out to support or resistance seems likely.

Notable Calendar Events in the next 24hrs
FOMC represents a major risk event on the horizon
FOMC Rate Decision - .25bps expected and we are probably building that in right now. If we get .50bps I have little doubt we will break out of this range to the high side as the longer term expectations will have to be adjusted. The bigger question is, what happens if we only see .25bps; how much of it has already been built in. It's hard to say - in the short term we could see a little move higher but we have to assume that's already factored in; a change in wording could obviously spark a strong move and I don't think we're going to see "measured" suddenly re-appear. The only surprise at this point, I feel, will be more hawkish sentiment, which will rally the dollar.

Trade Calls*
Currently holding short dollar positions; will reevaluate at 5:00GMT

 

[Bulldog]

Tuesday Model Forecast
What little relief we'd been granted earlier has vanished through the Asian session. The dollar has pushed above a fairly significant resistance point and opened the door for a move higher. There is a lot of resistance just below that will probably float the index through the UK session, but it will mean little if the market is disappointed with the FOMC announcement.

24hr Forecast: Short dollar into Tuesday (next update Tuesday 22:00GMT)
48hr Forecast: Short dollar into Wednesday. (nest update Tuesday 22:00GMT)
2 Week Forecast: Short into the end of next week.

Technical Outlook
2hr technicals are generally oversold, if just mildly. Heading into the FOMC any technical indicator will mean very little so I'll avoid putting too much emphasis on it at this point.

Notable Calendar Events in the next 24hrs
FOMC represents a major risk event on the horizon
FOMC Rate Decision - .25bps expected and we are probably building that in right now. If we get .50bps I have little doubt we will break out of this range to the high side as the longer term expectations will have to be adjusted. The bigger question is, what happens if we only see .25bps; how much of it has already been built in. It's hard to say - in the short term we could see a little move higher but we have to assume that's already factored in; a change in wording could obviously spark a strong move.

Trade Calls*
Currently holding short dollar positions; this trade is at a high risk for increased failure and tomorrow is essentially a make or break scenario as we have to begin to look to Friday and the NFP announcement. So far this month is getting off to a pretty rocky start for the short term model...

 

[Bulldog]

As the market begins to wonder if it has pushed the dollar to far before the release (we're seeing some reversal as the FOMC meeting gets under way) I feel it prudent to implament fairly tight stops to avoid turning this group of trades into serious losers if the dollar rallies as it has after the majority of the recent Fed meetings. Initially I'll trail in simply to reduce the loss of each trade; if by some stroke of luck the trade turns profitable prior to the release I will move the stops to at least break even; this has been a rough trade from the beginning and I be happy to get out of it only slightly wounded.

 

[Bulldog]

Both the yen and the pound hae been stopped out. The pound was our loss leader from the get go and has taken a bite out of our account (I'll post May's first Demo Report once the dust settles). As the anouncement draws near, I'll place entries for both the yen and the pound in the direction of the model bias but outside of the current range; right now I would be looking at 104.80 and 1.8980 respectively with stops placed just above (yen) and just below (pound) todays morning range.

 

[Bulldog]

48hr Model Forecast
We've been stopped out on two of the postions that were tightened up this morning. Re-entry has been calculated and is noted below. The 48hr forecast remains short into Thursday, which is no big suprise given the bullish sentiment. If the dollar does break higher today; the trade model will go off-lin until it has reached our resistance bands or shown considerable signs of consolidation.

24hr Forecast: Short dollar into Tuesday (next update Tuesday 22:00GMT)
48hr Forecast: Short dollar into Thursday (next update Wednesday 17:00GMT)
2 Week Forecast: Short into the end of next week (next update Sunday)

Technical Outlook
More sensitive indicators are overbought at this time, but we still see bullish sentiment in the MACD with plenty of room to run north. Everything still hinges on the FOMC release at this time but my gut feeling is that with the push through resistance yesterday we will see a continueation of the bullish sentiment up to our resistnace bands.

Notable Calendar Events in the next 24hrs
ISM - Non Manufacturing Business Survey.
I don't expect the ISM to contribute much more than market noise to the dollar. A decisive change in exchange rate from its release isn't likely.

Trade Calls*
Currently: Long [email protected] [email protected],NoTgt; Short [email protected] [email protected], NoTgt. These will be closed when momentum has show signs of falling off.
Closed (stopped out) Yen + 4; Pound - 150
Planned (entry on break)
AddEuro @ 1.2920, SL @ 1.2890, Tgt @ 1.2960
AddFranc @ 1.1930, SL @ 1.1980, Tgt @ 1.1870
EnterPound @ 1.8960, S L@ 1.8900, Tgt @ 1.9040
EnterYen @ 104.88, SL @ 105.20, Tgt @ 104.55

 

[Bulldog]

Model Forecast
Little surprise here, the 24hr forecast remains bearish on the dollar; we may see some technical easement in the buck now that the FOMC is behind us.

24hr Forecast: Short dollar into Tuesday (next update Tuesday 22:00GMT)
48hr Forecast: Short dollar into Thursday (next update Wednesday 17:00GMT)
2 Week Forecast: Short into the end of next week (next update Sunday)

Technical Outlook
RSI has moved lower and is now centered, but still has room to drop further. MACD looks as if it could be making another lazy turn south and our cyclical indicator has toped out.

Price is currently holding at the fairly substantial support that is just below, given the upside failure we might see a soft drift deeper into the support region.

Risk tolerance at this point is low, so I would anticipate softer price action Wednesday and Thursday heading into NFP

Notable Calendar Events in the next 24hrs
ISM - Non Manufacturing Business Survey.
I don't expect the ISM to contribute much more than market noise to the dollar. A decisive change in exchange rate from its release isn't likely.

Trade Calls*
All open positions were stopped out in the whip; the failure of the dollar to rally on the 25bps increase coupled with the still bearish model, has led me to re-enter at market, so I'm short the dollar again. All previous Entry Orders have been removed for now.

Currently:
Long Euro
Short Yen
Long Pound
Short Franc

 

[Bulldog]

There will be no 24hr forecast heading into the UK open; we need to let this late run play out before we throw it into the dataset. From a trading point of view this will finish me for the week. I don't want to enter new trades Wednesday that will most likely drift into Thursday as that day's price action will probably be very flat prior to the NFP release. I'll of course be running the model, but feel at this point it just makes more sense for us to stand aside...

The run up this evening did put us back in the black for the month if only just a little. I'll take what I can get. I have a feeling this entire month is going to be a pretty rough ride.

 

[Bulldog]

Model Forecast
The dollars continues to equalize after the late sell-off. This brings us into the center of our price range and leaves us plenty of room to run, and whip and flip on Friday.

24hr Forecast: Long dollar into Thursday (next update Wednesday 5:00GMT
48hr Forecast: Long dollar into Friday (next update Sunday 17:00GMT)
2 Week Forecast: Short into the end of next week (next update Sunday)

Technical Outlook
As you would expect being just two days away from NFP everything is pretty neutral; the RSI is only slightly oversold a this time and MACD in both the two hour and four hour configurations is centered. We have made a bottom in our cyclical indicator, but that provides little in the way of forecasting quality.


Notable Calendar Events in the next 48hrs
NFP
We're going right to Friday on this as there will be little to move the market tomorrow in the face of the upcoming payroll numbers. There is no way to accurately a payroll number and the best you can do is make an educated decision. I think we'll see numbers come in stronger than expected; GM among others have reported strong employment figures as of late and I think we'll see a strong payroll figure as a result.

Trade Calls*
I don't trade at or just before NFP as the risk profile is too high. There typically is no volatility and direction the day before and too much the day of. If I was going to pull the trigger on Friday it would be with very low leverage; scaling additional positions in about an hour after the initial release and each hour after that until we were just about an hour before noon on Friday EDT when I would begin to sell off. My final exit would be just after NY lunch hour. The initial release is to volatile to carry a full load and there is little certainty until the market begins to settle in and run. Tomorrow will probably be fairly soft in terms of price action and could easily leave you in no mans land heading into Friday.

Currently: Flat

 

[Bulldog]

The model remains unchanged heading into the UK open and I remain on the sidelines looking towards Friday.

 

[Bulldog]

Risk Metrics Forecast

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[Bulldog]

24hr. Model Forecast

The dollar is in a bit of precarious position here; breaks like this will often run to either our support or resistance bands, but before they do they often take out high or low points that the bands themselves make along the way. If you look at the heavy blue line (see PDF) it touches a spike in the support area that was taken out in the recent sell off of the dollar. That move continued on after a short period of consolidation, to push into our support bands. You'll also notice on the price action chart the indicator made a solid dive below the -100 level, a good indication there would be continued momentum.

In Friday's rally we failed to break above the recent low of the resistance band and have stalled at the 100 level on the Price Action indicator; so we may be looking at the tail end of this move.

The model is forecasting a weaker dollar in the next 24hrs and I intend to enter short dollar positions after the final analysis if the price action has continued to weaken. If there are continued signs of momentum or we don't see enough reversal in the PA Indicator I'll stay out until tomorrow. As it stands right now though, I'll be going short at 5:00 GMT


Trade Calls
Currently: Flat

Risk Metrics Forecast

Risk Metrics are cycling down after Friday's spike and we should see price action continue to cool off through the rest of Sunday. The probability of a larger break heading into Monday is very small.

Technical Outlook

Things are showing overbought in the dollar especially in the more sensitive indicators. Noteworthy here is the MACD which has plenty of room to run up, but may be showing some early signs of fatigue. We do have some trend line resistance at current levels and just above the dollar that could limit the upward momentum unless something fundamentally occurs to spur it on. A failure to hold at this level would most likely see us give up the majority of Friday's gains at some point this week.

Fundamental Market Movers

Wednesday: Trade Balance; A slight slip is expected in the continued imbalance of the trade picture. The wild card here is inflation and how it compares to other countries abroad. If US inflation is perceived to be increasing at a greater rate than other economies (and faster than the Fed's Tightening of Interest Rates) it will further decay the picture as outside purchasing interest will continue to wane. If the decline is larger than anticipated expect the dollar could be punished and pushed back into the center of the established range. Historically, the Fed has never been accused of tightening monetary policy too little and as a whole overshoots the mark; unless there is a large surprise in the number, I think the market will look to Thursdays retail sales to rebalance.

Thursday: Retail Sales; The market tends to be pretty sensitive to this figure and a solid move could ensue from its release. A small increase in sales is expected for the month of April and while most economists continue to forecast growth in sales and the economy as a whole, I think we shouldn't underestimate the impact of rising fuel costs. I would be more surprised to see the expected increase exceeded than I would the reverse. All that said, with the way retail sales is calculated, the rising cost of fuel could actually bolster the number as the figure doesn't adjust for inflation; in the end there is no way to accurately determine if we are buying more or just paying more.

 

[Bulldog]

The dollar has pushed far enough through resistance to make me nervouse, but not far enough to deter me from my trades. The model remains short the buck, but there is a very real possibility that momentum in this move will resume. At this point its a coin toss.

I've entered short dollar positions at market and will reevaluate in the morning - if we do get a continued push higher, we can reasonably expect penetration of the resistance bands before the move subsides; that would translate into another hundred pips give or take in each pair...

 

[sr3d]

nice job bulldog, it's very helpful to see the analysis. Please keep on posting.

Cheers!

BTW: nice homepage website even though it's very minimal in terms of technical information

 

[Bulldog]

nice job bulldog, it's very helpful to see the analysis. Please keep on posting.

Cheers!

BTW: nice homepage website even though it's very minimal in terms of technical information

Thanks... I'm doing the site myself so I'm peicing it together as I have time. I hope to be filling it out more this week; I appreciate the critique and will try to be a little more detailed with the information. Thanks for taking the time to look and let me know.

 

[Bulldog]

24hr. Model Forecast
The dollar has continued to push slightly north, but the price action is showing signs of weakness. I would expect to see this indicator begin to make its way back down towards its upper band, a pretty good sing the rally has ended.

The model remain short into Tuesday and we'll maintain our current positions into the next tomorrow.


Trade Calls*
Currently: Short the dollar

Eur Long at 1.2796
JPY Short at 105.29
GBP Long at 1.8866
CHF Short at 1.2796

Risk Metrics Forecast

The RCI had bottomed out and depending on the price action in the next 24 hours we should see Risk Metric levels increase. At this point I think we are looking at Wednesday before the next major move occurs. It will depend on how long and how tight the current range remains.

Technical Outlook
Technically we've done something very interesting; there has been a minor bullish trend line that has captured the consolidation phase of a couple of the last moves. Today's narrow range in the dollar has again fallen into that area. Soon something will have to give, even if it's not a dramatic break the range can't continue to restrict on itself much further and still hold any type of price action.

All indicators in this time frame have moved well north and are showing signs of being overbought: The dollar is starting to look a little heavy here.

The move down in the RSI is a mixed blessing; it could be the initial stage of momentum finally leaving the bull run, or it could simply be a deep breath before the next push up.

From a price point we've managed to hold above some significant support at this point and all of the resistance that is just above is fairly minor in terms of recent price action.

 

[Bulldog]

24hr. Model Forecast
The dollar has wobbled around the minor fib resistance for two days now and has finally retreated just a little. Right now the move up that was started last Friday is looking cyclical and a strong push to the upper bands seems less likely then it did on Sunday/Monday.

Relative price action has continued to fall off and we're in a make or break situation. If this indicator falls much further without an actual break lower in the dollar, we're going to have to abandon the trades as we could be seeing a bullish setup establishing itself. We're not there yet but it's becoming a concern.

The 24hr forecast remains short for the dollar and I'll hang onto our short dollar trades for now.


Trade Calls*
Currently: Short the dollar

Eur Long at 1.2796
JPY Short at 105.29
GBP Long at 1.8866
CHF Short at 1.2796

Risk Metrics Forecast

We see the cyclical part of our analysis making a top so we know within the next 48hours we should see a stronger move. We'll be looking for the risk metrics levels to turn up soon and make a more aggressive move back to the top of its range.

Technical Outlook
The dollar pushed below the minor trend line that was holding it up; now we're sitting on top of a much more substantial level of support. This is an area that could easily provide a spring board back up, if it fails though, there will be plenty of room to run south and a 100 point decline in the index is not out of the question if the dollar break lower.

From an indicator perspective the dollar continues to look heavy with the MACD just beginning to roll over and the cyclical indicator in the middle of a well developed top.

RSI has centered itself, but is slightly oversold; in the big picture a rally in either direction is possible from this level, but I would still favor a move down technically give the overall picture.