Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Technical Analysis

To many, it has been a classic year of ‘follow the pain’ when it comes to major foreign exchange. Here we are once again at the top of the range for the USD and can spot reversals across different indices.Given the levels from where these developments are unfolding, the latest price action suggests a lower USD from here at least in the near term. Beyond that we may even see a move to the other end of the ranges which could be anything up to 3% away.Note, USDJPY does not look particularly concerning. The recent breaks higher in long end US yields is likely to support it. Should it remain stable, it is still expected that JPY crosses may do well – see <a href="https://www.smartkarma.com/insights/fx-jpy-crosses-ready-to-move" target="_blank" data-smartkarma-citation="insights:55906" rel="noopener">FX: JPY Crosses Ready to Move?</a> .

To many, it has been a classic year of ‘follow the pain’ when it comes to major foreign exchange. Here we are once again at the top of the range for the USD and can spot reversals across different indices.Given the levels from where these developments are unfolding, the latest price action suggests a lower USD from here at least in the near term. Beyond that we may even see a move to the other end of the ranges which could be anything up to 3% away.Note, USDJPY does not look particularly concerning. The recent breaks higher in long end US yields is likely to support it. Should it remain stable, it is still expected that JPY crosses may do well – see FX: JPY Crosses Ready to Move? .

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

We suggest taking profits on our long-standing recommendation to buy the Mexican peso against the Canadian dollar. The peso has been among the best-performing currencies in EM this year helped by the central bank’s surprise rate hike at the last meeting. The Canadian dollar, meanwhile, has underperformed following last month’s dovish taper by the central bank. We remain constructive on the peso but opt to close the trade as we see the risk that the central bank conveys a dovish message at the next meeting even as it raises the policy rate.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

We suggest taking profits on our long-standing recommendation to buy the Mexican peso against the Canadian dollar. The peso has been among the best-performing currencies in EM this year helped by the central bank’s surprise rate hike at the last meeting. The Canadian dollar, meanwhile, has underperformed following last month’s dovish taper by the central bank. We remain constructive on the peso but opt to close the trade as we see the risk that the central bank conveys a dovish message at the next meeting even as it raises the policy rate.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Take Profits on Long Mexican Peso Vs Short Canadian Dollar

In our monthly trade ideas recap note, we provide a performance update of the trade recommendations in FX and rates that we make weekly and discuss the new recommendations as well as those we closed over the past month. We have made a total of 21 trade recommendations so far, of which 15 are in the money.

In our monthly trade ideas recap note, we provide a performance update of the trade recommendations in FX and rates that we make weekly and discuss the new recommendations as well as those we closed over the past month. We have made a total of 21 trade recommendations so far, of which 15 are in the money.

Alpha Bites: Performance Summary of Trade Recommendations – August 2021

We are not expecting the FOMC meeting tomorrow to be market-moving. Having said that, with the (negative) correlation between the US dollar and EM currencies the highest since 2012, any implications for the dollar from the meeting tomorrow would ripple through EM currencies. This impact is likely to get exacerbated by the rising correlations within the EM FX universe, which implies that we are currently in a "risk-on/risk-off" period.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

We are not expecting the FOMC meeting tomorrow to be market-moving. Having said that, with the (negative) correlation between the US dollar and EM currencies the highest since 2012, any implications for the dollar from the meeting tomorrow would ripple through EM currencies. This impact is likely to get exacerbated by the rising correlations within the EM FX universe, which implies that we are currently in a "risk-on/risk-off" period.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Cross-Correlations Between EM Currencies Rise Sharply

Price action on the DXY Index daily chart is warning of a turn again. It is the opposite of what we saw at the other end of the range in MayA break below 92.59 would likely open the way for lower levels

Price action on the DXY Index daily chart is warning of a turn again. It is the opposite of what we saw at the other end of the range in MayA break below 92.59 would likely open the way for lower levels

United States

The U.S. Dollar Index(USDX) indicates the general int'l value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. The ICE US computes this by using the rates supplied by some 500 banks. FOR REAL TIME SEE EIS ICEA<GO>.

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Dollar Index (DXY CURNCY)

Another Turning Point for the USD

The USD once again looks to be turning from near the extremes of the ranges of this year. A weaker USD is likely to be seen in at least the short...

Shyam Devani

FX Dashboard: Take Profits on Long Mexican Peso Vs Short Canadian Dollar

We suggest taking profits on our long-standing recommendation to buy the Mexican peso against the Canadian dollar. The peso has been the best...

Gautam Jain, PhD, CFA

Alpha Bites: Performance Summary of Trade Recommendations – August 2021

We provide a performance update of all our trade recommendations along with discussing the new trades from last month. We have made a total of 21...

Gautam Jain, PhD, CFA

FX Dashboard: Cross-Correlations Between EM Currencies Rise Sharply

While we are not expecting the FOMC meeting tomorrow to be market-moving, we need to watch for any impact on the dollar as it would ripple through...

Gautam Jain, PhD, CFA

The USD Index (DXY) Is Tired

Fresh price action indications are pointing towards a weaker USD. Watch 92.59 in the short term on the Dollar (DXY) Index

Shyam Devani

Price Gauge

52-week Range

Market Cap (USDm)

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