DXY & EUR/USD - What's The Risk
To start, I will save the macro analysis for the upcoming July report, focusing strictly on the risk and opportunities for the June 24th trading week.
Looking at the $DXY, we have now eliminated the yearly upward sloping trend-line support that helped form the rising wedge in the dollar.
With the pattern now breaking to the downside; we have to outline support/resistance to define our downside risk and where profit taking will most likely take place.
We can see the $DXY has now returned to its old trading range with resistance forming up at (97.50-98.00), and critical support coming in at (95.8-95.20)
Those who missed the breakdown in the USD will most likely chase this trade to the downside, so I'm expecting the market to give the FOMO crowd a bit of juice and then a vicious reversal to take place around mid-week.
Turning to the $EURUSD we can see the inverse of the $DXY, with price taking out the previous June high at $1.13500, giving us a bit of upside risk towards the March highs at $1.14500.
Again, a similar pattern to the USD with price providing just enough room for a brief rally to the upside before the risk of a significant reversal becomes highly probable.
Ultimately, I see chasing the trend intra-day providing a short-term opportunity, but be extremely cautious here as this rally may get faded aggressively.
Gold Breaking Out, Can It Be Sustained?
We can see that gold has broken out on a combination of geopolitical news from Iran paired with dovish rhetoric from the fed, which caused a surge up to the $1400.00 level.
What's interesting is we have cleared significant resistance at the ($1350 - $1360) zone which has held down the price of gold for over five years.
This break is significant and is worthy of note; however, I would be extremely cautious chasing this trade to the upside. We have rallied over $100 in less than 30 days, so the probability is now skewed towards a pullback and even a potential false-breakout.
I would much prefer to be a seller of gold at this level, and would only consider a long trade upon a successful re-test of the previous 5-year resistance at new support.
High In Bonds, Low In Yields?
Government bonds have been rallying as the safety trade since Q4 18 due to a whole host of concerns in regards to global growth, recession risk, trade war, etc.
However, from a technical perspective, we can see that TLT looks to be peaking following the FOMC meeting, with yields bottoming and confirming the potential reversal.
Traditionally, making a new intra-day high but failing to close above the previous week's open is a significant bearish signal, and with rate cuts fully priced in by the market, I don't see much upside left here.
Looking at yields, we see the inverse pattern with 10-Y yields briefly dipping below 2% just to recover and close seven basis points higher at 2.07%
The best way to play this would be to purchase put options on $TLT.
July Report out July 4th Weekend.