DXY, USD/ZAR, USD/JPY and FTSE 100 Forecasts – Markets Still Focused on Headlines

DXY Technical Analysis

The first chart I have in front of you is the US Dollar Index. This is going to be probably one of your more important charts at the moment. I generally keep an eye on it anyway, so the fact that it gapped higher during the day and is starting to turn around suggests that we are still very much in this range, but I’m watching the 99.75 level. If we break above there and then challenge the 100 level, anything above there probably unleashes a lot of chaos.

It would almost certainly be a risk-off type of move, so watch that. Not a tradable instrument, but I use this as a gauge on risk sentiment and have definitely been doing so as of late.

USD/ZAR Technical Analysis

The US dollar South African rand is part of that carry trade that had worked so well until just a couple of weeks ago, but it looks like it’s trying to reassert its situation here. You’ll see that a couple days back, I said something about shorting this for a short-term trade. That might be setting up again right here at about 16.5.

If we can get a little bit of downward momentum, I’ll be aiming for 16.16 again. Just a short-term trade, I’m not looking for the world here, probably something that lasts at best 3 days just because of the volatility out there in the headlines. Conversely, if we turn around and rally from here, then I’ll be watching the 17 level.

If the dollar starts to destroy the carry trade, then it’s going to play absolute havoc with other currencies that aren’t necessarily higher yielding like the South African rand is. Think of the Euro, it will probably just decimate the Euro if we start to see it really overcome the interest rate differential.

USD/JPY Technical Analysis

The US Dollar against the Japanese Yen, if there’s a place that this could pull back, this is it. That being said, the area between 158 Yen and 160 Yen is a major resistance barrier. If we can clear 160 Yen, this pair is going to rip to the upside. Short-term pullbacks and a little bit of a bounce, I’m willing to buy because I want to be involved if we do break to the upside because we’re breaking resistance from 1990 or so.

In other words, it’s a big deal. As far as shorting is concerned, I don’t really like doing it yet although you can make an argument for it eventually. As things stand right now, I’d be very interested in buying on a drop maybe down to 158 and a bounce.

FTSE100 Technical Analysis

I’m watching the FTSE 100 in the UK from a purely technical standpoint. It does look like we see a lot of support here right around the 10,300 level and it’s worth noting we had a pretty reliable channel for some time, and it looks like we’re bouncing off the top of it, the same channel that we had broken out of.

The 50-day EMA and stocks across the continent, pre-market trading in America, are trying to regain their footing, so the FTSE 100 might be a nice back door play to a little bit of risk appetite coming back to the market. If we break down below 10,000 though, I’m just going to throw this chart away and ignore it for a while.