Downtrend readings have returned to the AUDUSD and NZDUSD but bearish positions are risky until a break of support. USDJPY and USDCAD remain classified as in uptrends, although the former could reverse near 101.
About the DFX Trend Index
The DFX Trend Index ranges from -100 to +100 and is updated everyday at 5 pm eastern US time. On the charts, bars are painted blue if the index is above 50 (uptrend) and red if the index is below -50 (downtrend). Readings between -25 and +25 result in a green bar to indicate that price has reversed to the mean. The spreadsheet shows the index values for the last 15 days.
50 to 100: uptrend / potential for a top increases the closer the index is to 100
25 to 50: in a range / bullish potential
-25 to 25: price has reversed to the mean
-50 to -25: in a range / bearish potential
-100 to -50: downtrend / potential for a top increases the closer the index is to -100
EURO / US DOLLAR
The trend index is at -45, which indicates range / bearish potential. The wave structure is at odds with classifying current conditions as an early downtrend. The pair is in the middle of a choppy downward sloping channel. This is no way of properly controlling risk at the current juncture.
BRITISH POUND / US DOLLAR
The trend index is at -81, which indicates downtrend. Expect a test of 1.35.
AUSTRALIAN DOLLAR / US DOLLAR
The trend index is at -68, which indicates downtrend. It is best to wait for a break from the compressed range before taking sides.
NEW ZEALAND DOLLAR / US DOLLAR
The trend index is at -72, which indicates downtrend. A drop to a new low would present a bearish opportunity.
US DOLLAR / JAPANESE YEN
The trend index is at 94, which indicates uptrend. One more high (above 99.68) is expected before a reversal.
US DOLLAR / CANADIAN DOLLAR
The trend index is at 91. Stay long as the pair has exceeded the October high. Risk should be at 1.2712 now.
US DOLLAR / SWISS FRANC
The trend index is at -5, which indicates mean reversion. Following strong uptrend readings in early February, the USDCHF reversed and recent readings have indicated mean reversion. Notice that there were not strong uptrend readings at the top of the recent range. This indicates a weak market (divergence).
Strategy: short, against 1.19, target 1.0950
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.
Please send comments about this report to jsaettele@dailyfx.com
