Due to technical issues, the Customer Support line is currently unavailable. Please use the live chat or email communication.

DXY Could Face Headwinds As We Approach April

Share On Facebook

If the US dollar index (DXY) is to follow its seasonal tendency, headwinds could cap upside potential in March before dragging it lower around April.

We can see that, whilst January and February have averaged positive returns, their potency has dwindled over the past 5 years (relative to the 30-years) before average returns have become increasingly bearish throughout March and April. Curiously a similar seasonal pattern can be seen on gold, despite the two markets generally sharing an inverted correlation.

Still, as these are historical averages, there’ll no doubt be outliers which buck the trend. Therefore, we don’t consider them a forecasting tool, but something to consider alongside other forms of analysis as part of a broader trading plan.

Digging though the numbers, the following stats are of interest.

Over the past 30-years, in April DXY has:

  • Closed lower 70% of the time
  • Posted an average return of -0.53%
  • Averaged a negative return of -1.58%
  • Averaged a positive return of 1.94%
  • Averaged negative returns over the last 5, 10, 15 and 30-years

 

With 70% of negative closes, there seems to be a relatively high probability of a negative return in April for DXY. Although it’s interesting to note that, when a bullish close arrives, average positive returns are greater than average downside returns.

Currently trading just 0.3% higher for the month and with a week and a half left in it, there’s plenty of time to assess how prices develop from here. However, we’re keeping an eye on the potential bearish hammer beneath the key resistance zone, which comprises of the 2018 highs and a 61.8% Fibonacci retracement level. Considering that we’ve also seen 3 higher wicks since February, it shows the difficulty USD bulls have had around 2018 highs. And as momentum form the 88.25 low has been waning for months, we’ll continue to monitor for signs of a potential long-term reversal as price action develops, before drilling down to the lower timeframes.

Over the near-term, perhaps tomorrow’s Fed meeting could provide the dovish elements to weigh on the greenback. Recent comments from officials have veered towards the dovish side, and there have been reports that the Fed are researching the possibility to expand their balance sheet, and what impact it would have on markets. Whilst we don’t expect this to be announced any time soon, it’s plausible they may reduce the tapering speed, or lower expectations to just one more hike this year.

Correlation with DXY (20-period lookback)
To consider setups around a DXY theme, these pairs currently shares the strongest correlation with the index.

EUR/USD: -0.97

USD/CHF: +0.88

USD/CAD: +0.83

AUD/USD: -0.81

 

City Index: Spread Betting, CFD and Forex Trading on 12,000+ global markets including Indices, Shares, Forex and Bitcoin. Click here to find out more.

 

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20190424 10:27:48