25th September - The Dollar still looks strong
28 September 2015
TECHNICALS:
Dollar Euro Monthly chart
The long-established bull parallel channel for the Euro hides within it another channel formed since the 2007 crash - that of a strengthening Dollar.
Note too the breakdown through the Prior Lows around 1.20 at the end of 2014.
That created massive overhead resistance at the 1.20 level.
And since the breakdown, the market has dithered ....
Look closer.
Daily Dollar Euro Spot chart
The ‘dither’ in the monthly chart turns out to be another bull channel!
Note well the well-established (at several points) lower diagonal support of the channel.
The market is not even challenging that support yet - but if it does , note the horizontal at 1.0818 and then the next support for the Euro lies right down at parity - see the monthly chart.
In short, Dollar strength may have paused since the beginning of the year, but the big picture of massive overhead resistance to Dollar weakness and no real Euro support until parity still favours Dollar strength.
FUNDAMENTALS:
The Dollar has made something of a recovery driven by:
So where does the Dollar/Euro go from here?
Clearly there are several factors still at work, that will decide the Dollar’s trajectory in the short and medium term. Aside from continued weak data from China, traders will be influenced by: both what the Fed does next, and the outcome of events in the EU/Euro zone both economic and political as driven by the growing and almost out-of-control migrant crisis.
Although the Fed held rates steady in September, they did indicate a desire to hike this year and with meetings in October and December they still have time to act. But will they?
Clearly, if US data strengthens and the Labour market tightens further, the answer is yes. But it will probably be by small gradual steps as policy makers are aware that if the slowdown in China deepens it will have consequences for other economies such as Japan and the Euro zone which are already operating at sub-optimal levels.
But in addition to economic fundamentals, the wave of immigrants arriving in Europe with seemingly no end in sight, could have a serious affect on the Dollar/Euro.
Already the much vaunted co-operation and cohesion of the EU/Euro zone has been put to the test and in some quarters found wanting. Member states have either attempted to close their boarders or have ushered the migrants arriving on their land on to neighbouring countries.
And although there have been calls for member states to shoulder a fair share of the number of migrants they take, as well as sharing in the financial costs associated with resettling the migrants, not all states are enthusiastic.
It isn’t too difficult to imagine how this crisis of human proportions could develop quickly into a political and economic crisis within the EU/Euro zone. If more member states re-impose boarder controls political friction will increase and with it a desire for economic protection. That would undermine the whole basis of the political EU, weaken an already fragile economy and undermine the Euro.
How likely that scenario is likely to develop depends on both political will and good will in member states to find an acceptable solution to the current refugee crisis. A significant number of the refugees are merely economic migrants and perhaps could and should be sent back.
The impact on Dollar/Euro could be significant but for now, the Dollar remains poised, waiting for a trigger to begin the next leg of the stalled bull run. Is it the Fed hiking rates or a breakdown within the EU/Euro zone that will be the catalyst?
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2nd October - Bonds v Equities 
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21st September - The UK Gilts are underpinned