Last week ended with a large amount of U.S. dollar selling. The CPI was much better than expected (7.7% v. 8.0%), which the market perceives as the Fed slowing down or stopping future interest rate hikes. Combine the Republicans disappointing performance in the mid-term elections, and the dollars route was on. The high in the USD index was 114.10, it is sitting at 106.50 to begin this week which is a drop of 6.7% in seven weeks! Equity markets stage a strong rally, while bitcoin and the crypto market got crushed as FTX is in dire financial condition. Combine the inflation report, the election and a dollar that had been stretched, and it was the right mix for the dollar be sold.

This coming Tuesday we’ll have another U.S. inflation number, the PPI, but that does not impact the market as much as the CPI. We also will see retail sales figures but unless it is ‘outsized’, there will not be too much attention paid to it. The U.K., euro area and Canada will have their inflation data released and this could be the key data for the currency markets.

EUR (1.0330): The rising channel that had been mapping the single-currency for the last several weeks, has been breached. In typical fashion, the Euro hourly charts have two prints at 1.0350. This can be a double top forming, or a level that Friday’s short-term traders used to take profit on their long positions. We expect more currency buying against the dollar. The market has been under 1.0000 for too long without making another significant low. This has changed the market and the bulls are now in control. Target 1.0750.

GBP (1.1780): The pound is now making a straight line higher to 1.2000. Unlike the euro, the GBP remains in its channel, which, if it holds (1.2000) risks pushing the sterling back toward 1.1200. This type of activity in a currency can whipsaw back and forth on any news. Pick levels and focus on those, not the noise in between. Achieving levels that improve or protect margins is the main goal. FX forwards are a great answer to manage future cash flows. Reach out to a GreenShootsFX team member to discuss further.

JPY (139.20): A sigh of relief from the BoJ as the natural market conditions pushed USD/JPY back under 140.00, in just a few days! Now the pair is setting up for another round of selling. Levels of support to note are 1.3865 and 1.3650. Resistance is 140.50 and 142.00. The impressive buying of yen does stress short yen positions. This may push the currency even higher as those positions are unwound and as the currency pair has showed, it can move quickly, and without a lot of news behind it.

CAD (1.3260): The head and shoulders top on the daily chart has clearly capped the rally at 1.3775. The measuring objective of this pattern is 1.3000. Expect buyers of U.S. dollars to be at or above 1.3000. That should satisfy the short USD/CAD positions. With oil moving near $90 and cold weather beginning to move across the U.S. (and Europe), that should help push of the Canadian dollar.

MXN (19.5000): The Bank of Mexico adjusted their interest rates higher by 75 bps last week, and now stands at 10%. The peso rallied to 19.2600, then fell quickly to the current level. Was this a short covering (buying dollars to capture the gains) or has the market began questioning the strength of the U.S. economy? Keep in mind that the peso does trade with the U.S. economy. A weaker economy leads to a weaker peso. Resistance is now at 19.70 and 20.00. Support is last week’s low of 19.26. Then 19.10.

CNY (7.0760): The dollar’s fall is not fully captured in the US dollar index (DXY). USD/CNY literally collapsed and although it is now moving within daily ranges of 200 points or more, the watchful eye of the PBOC remain diligent. With the Chinese communist party opening their economy, the demand for the CNH and CNY is growing. There will be a further shove of the dollar lower if the Chinese economy continues to remain open and grow. Support at 6.95 is not going to stop the dollar’s fall.