The forex market is offering some attractive setups as we approach Thursday’s PMI data.
Watch today’s mid-week outlook to see how I’m trading the DXY, EURUSD, GBPUSD, and USDCHF.
US Dollar Index (DXY) Outlook
The DXY is once again below its 2011 channel floor at 97.70. The index reclaimed the level in early July, which shifted my bias on the dollar from bearish to bullish.
However, over the last two weeks, I’ve mentioned that the DXY remains below 97.70 on a monthly closing basis. So, although we’ve seen weekly candles above that mark, the monthly time frame is still treating it as resistance.
The DXY lost 97.70 support on Tuesday with a daily close below the level. That flips it back to resistance and opens the door to the July low at 96.38.
Of course, the possibility of the DXY closing this week above 97.70 remains, especially with the number of PMI numbers from Europe expected on Thursday.
With that said, the US dollar’s failure to hold above 97.70 on Tuesday casts a bearish shadow over the currency.
EURUSD Outlook
EURUSD is back in rally mode following a relatively bearish start to July. We were shorting the euro in the VIP group on July 4th, a trade we eventually booked a profit on near 1.1630.
However, since then, the EURUSD has been somewhat unfavorable. On the one hand, the euro remains below its May ascending channel, making longs difficult. On the other hand, the DXY is below 97.70, making EURUSD shorts unfavorable.
Tuesday’s session closed right at the 1.1750 resistance area, resulting in a pullback on Wednesday. That said, I’ll favor EURUSD longs on pullbacks while the DXY holds below 97.70.
Lastly, remember that the PMIs out of Europe on Thursday could shake things up for pairs like EURUSD.
GBPUSD Outlook
GBPUSD is breaking back above its 2025 trend line this week after closing below it on the 14th. The pair retested the underside of the trend line several times recently. Still, Tuesday’s session appears to have closed above it.
As mentioned above with the euro, Thursday’s PMI data could shake things up for the pound, so trade it with caution.
If GBPUSD can hold above the 2025 trend line at 1.3535, the 1.3750 resistance area could be next. That could align with the DXY retesting its July low.
Alternatively, a sustained break below the 1.3530 region on the high time frames would start to look more bearish. That said, the DXY would need to maintain a sustained break above 97.70 for GBPUSD to flip bearish. Until then, I’ll favor longs on pullbacks.
USDCHF Outlook
USDCHF broke its July ascending channel support on Tuesday as the DXY fell below 97.70. I discussed this potential short setup with VIP members on Monday, and I pulled the trigger on a short position at 0.7973. The trade was announced in the VIP Discord group in real time, as I do with all trades.
Although the trade was immediately profitable, the outcome of this trade could hinge on Thursday’s PMI data.
As long as USDCHF remains below the 0.7970 area, I will maintain my short position. My target for the trade is the bottom of the May descending channel or 0.7720, whichever comes first.
As noted above, a sustained break above 0.7970 on the high time frames would start to look more bullish for USDCHF. However, I want to stress again that any US dollar longs while the DXY is below 97.70 are ill-advised.
