TechnoMeter

Traders hoping to gain an understanding of the LT direction of the USD would do well to keep an eye on the Trendline connecting higher lows since 2014. Currently, DXY is showing good Trendline support over the longer-term near 98.50. The test of the 3-year Trendline aligns with long-term seasonality studies where DXY has risen in 9 of the past ten years. However, recent momentum in past months have been disappointing DXY bulls, and the EUR is a key reason why DXY fails to gain upside traction.



Much of the EUR downside since 2014, when DXY took off higher on the chart below, has been exasperated by fears of “what’s next?,” for the Euro. However, a look at the options market will show you that over the next two months, the 25-delta risk reversal is trading at its highest levels for the year. In other words, options traders have never worried less about EUR downside relative to the USD this year, which could keep EUR/USD trading higher on average.

Any traders with an upside bias on DXY should continue to watch this Trendline support. Ichimoku currently favors downside momentum continuing and there remains hard resistance at the gap high after the first round of the French Presidential election when EUR/USD gapped over the weekend by its largest margin ever from 1.0750 to ~1.0900.

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