In this past week, we have seen an appreciation in the US Dollar despite the not so impressive Non-farm Payroll Employment coming out at 156.000 in September. This is not very bad data, and is hardly an improvement on last month. I believe that the Dollar appreciation was caused predominatly because of what is happening in the UK since economical instability is still talk of the day. Prime Minister, Theresa May, has announced that Article 50 will be trigged before the end of March which implies that Brexit is happening. Even though the British PMIs data was positive, indicating industrial expansion, the British Sterling is still not convinced and is depreciating.
When we look at the US Dollar Index chart above, you can see that the price broke through resistance and retraced soon after. I will consider a proper break and a continuation of appreciation of the USD if the price continues to increase in value. If this occurs, I will then consider placing the Dollar in an upwards channel going towards the resistance which is marked by the horizontal blue line. This movement will not occur in one week but over a period of weeks.
Last week in the EURUSD I was expecting a sell which eventually occurred towards the end of the week. There is a continuation sell pattern forming of the weekly, daily and 4 hour chart time frame.
Trade idea: if the price finds resistance at 1.1290/300 area, I will look to sell this currency pair looking to take a profit at around 1.1130 price area, which will give us approximately 150 pips. If it breaks and continues the sell move, I will be looking to take another 80 pips @ 1.1050 price level. The above trade idea will come to pass if the Dollar Index continues to appreciate. Remember to pay attention to two fundamentals announcements this week: the German ZEW economic sentiment is on Tuesday and then Yellen will be speaking on Friday evening (NY time) which means that volatility may increase at those times.