To The Moon

The tepid foreign exchange market in the first half of the year continued the pattern of wide fluctuations since the end of 2022. Except for the yen, most varieties cannot really make breakthroughs. However, as the saying goes, a long time must be combined, and a long time must be divided, the foreign exchange market is gradually approaching the real outbreak as time goes on. Even if there may not be an explosion immediately, the opportunity to obtain a trending market in the next 6 months still deserves our due attention or advance planning now.

As we all know, although the US Dollar Index is an associated product (the result recorded after the US dollar is weighted against other different foreign exchange varieties), it still has a very good reference value.

As shown in the figure below, the US index market, as we said at the beginning, has fluctuated within a diamond structure for quite a long time in the past. Before this consolidation, what was visible to the naked eye was the vigorous rise of 88-114 US dollars, which lasted for almost two years.

Based on the above market, we are more inclined that the US dollar has completed the main rise, but has not yet ended the final market. The 99-107 market is the second confirmation of the substantial adjustment of the market from September 2022 to mid-2023, which is a so-called platform arrangement. If this assumption is correct, then at least in the general direction, we can conclude that the future winners in the foreign exchange market will still be in the US dollar.

Conversely, if the dollar has run out of steam, then we should see an accelerated downward trend in the next wave of market prices. However, referring to the previous pullback/retracement space, although this possibility exists, it is very limited, because it will mean a major collapse of the dollar.

However, in the current macro environment, we cannot see the factors that trigger this fluctuation, unless there is a black swan-level political turmoil before and after the US election. Coupled with the fact that the Federal Reserve continues to release pigeons on interest rate cuts, the European Central Bank now seems to have a high probability of cutting interest rates with the FED in advance. This means that from the perspective of monetary policy, the risk of short-to-medium-term pressure on the euro is greater than that on the dollar.

Going back to the market itself, from the perspective of technical form, the reasonable countermeasure is naturally to join the winner after breaking through the form.

According to the timeline, the pattern itself will end before September at the latest, that is, it can be sorted out for about 3 months at most. In fact, the dollar bulls have already taken action before, but judging from the integrity of the symmetrical graph, the pull in the first quarter is more like a test, and now it is a grinding state for both long and short positions. However, we can make an appropriate layout in advance, and prepare enough bullets and backhands to meet the relatively low position cover or go long on the right side after a real breakthrough.

From a price point of view, the current level is at a vague level, lacking effective directivity, and a better entry point is around 103. Therefore, the strategy that can be considered is to establish a bottom position first, and then find a better point to increase the position below 103. Unless it is at a new low, the general logic remains unchanged. From the perspective of breakthroughs, breakthroughs above the shape may be repeated. It is best to wait for a weekly swing high breakthrough before confirming. The current level is 106.51, but it may move down a little in the future. If there is such a change, we will follow up in the following content.

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