USD trading setup: trading zone and forecast
In yesterdays post we noted that speculators are heavily short the USD and in a previous post heavily long commodities which points a correction in the USD against the commodity currencies. In this article we will look at 4 commodity currencies against the US Dollar – USD/CAD, NZD/USD, USD/NOK and USD/MXN To see our view on AUD/USD check out our post last week.
Commodity prices have surged in response to investors taking an optimistic view on the outlook for the global economy and fund managers have built up a record long position which can be seen on the chart below.
The main driver in terms of commodity strength in the last few months has been a weak USD but the USD is now a bearish extreme and speculators hold a big net short position which can be seen on the chart below.
The global economy making a quick recovery from the pandemic is now discounted in our view. An oversold USD and the commodities at a bullish extreme gives potentially attractive long USD trades against the commodity currencies.
USD/CAD: After rallying up from the 1.2600 level we are now trading sideways in a channel and view the USD as a buy on an upside breakout.
NZD/USD: After moving strongly to the upside we are now trading in a sideways channel and volatility is dropping which warns of a big move and we see the NZD as a sell on a downside breakout – if we were to breakout to the upside we expect the rally to fail into chart highs.
USD/NOK: After moving up from chart lows we are now trading sideways in a channel and expect an upside breakout to follow through to major resistance levels indicated.
USD/MXN: We have rallied strongly from chart lows and the recent correction is just a correction of overbought if we breakout to the upside again we expect follow through buying up to major resistance levels.
Research provided by LearnCurrencyTradingOnline.com
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