Overview: This week, the global market remained relatively risk-off as the stock market edged lower with the US ISM remaining bleak and Euro area core inflation accelerating, which can show inflation to be problematic for central banks and indicate that further rate hikes would be more appropriate. Such fundamentals can be viewed as supportive for the US dollar, but they can also increase the downside appetite for risky assets, especially the stock market.
This week, the economic calendar points to several high impact data releases, such as the shocking downturn of US durable goods orders, the stalling of Canada GDP growth, the softening pace of Australia GDP growth, increasing China manufacturing PMIs, a bleak US ISM manufacturing PMI, Japan’s slight increase in consumer confidence, raising Euro core inflation and unchanged unemployment, and the upcoming US non-manufacturing PMI.
DXY
Starting with the dollar index, which gauges the dollar basket. After making a break of the bearish channel, price made a strong rally to the 105.37 level, which will be January’s high, where the dollar found rejection and has been struggling to push beyond the resistance level. A break to the upside would then put an end to the bullish trend and evolve into a possible trading range between 105.37 and 103.75 as the high and low points of the trading range.
The 200-day moving average is still relatively far from the current price at 106.54, while the 50-day moving average is just below the trading range at 103.37. The stochastich, on the other hand, is showing how the DXY is currently overstretched as it has stayed in the overbought area since early February, which also shows the strong bullish pressure coming into the DXY.
EURO
The euro still retains the bearishness it left off in February and has been trading below the 50-day moving average since early February. The euro bottomed in late February and tested a previous resistance level at 1.0665 before finding sellers who pushed the price lower. The bears could target the previous January’s support level at 1.0510, and a break below the support level would then reinforce the bearish trend. However, a break of the 1.0665 resistance level would then lead to the 1.0728 resistance level, which aligns with the 50-day moving average, coming into play. But for now, Euro is showing a mixed bias as the broader range is between 1.0728 and 1.0510 as the high and low points.
The 200-day moving average is still way below the current price at 1.0326, while the 50-day moving average is relatively closer at 1.0724. The stochastic, however, just came out of oversold territory, which would then hint at a potential move to target the upper resistance.
POUND
Not much has changed in the pound sterling as it still remains contained in the broader trading range between 1.2450 and 1.1850 and even more contained between the 50-day moving average and 200-day moving average. The pound sterling found support at the 200-day moving average at 1.1913 and resistance at the 50-day moving average at 1.2136. A break below the 200-day moving average can be a limited trading opportunity, as the 1.1850 support level could be on guard for any bearish play. A break of the 50-day moving average could give traders more breathing room to target the 1.2450 resistance level. The stochastic is currently neutral and hovering just above overbought territory.
YEN
The yen stalled over the past trading session after the strong bull move since last month. Currently, the price is approaching a key technical area in the market, where it is just below the 200-day moving average and testing the 38.2% Fibonacci retracement level from the October 2022 bearish trend. Also, we have the December 2022 resistance level of 137.80 coming into play. So we have many strong confluences that act as a barrier for the USD/JPY to continue on its bullish path. A break of those barriers would then open a path for the pair to target the 140-round number. While a failure of the break could attract bears to trade the pair lower with the next support area at 134.30,
The 200-day moving average is just above the current price of 137.29; the 50-day moving average is quite far from the current price of 132.07. The stochastics show the price to be overstretched as it has remained in overbought territory since mid-February and also imply strong bullish pressure in the currency pair.
AUSTRALIAN DOLLAR
The Aussie dollar found support at 0.6700 after the strong bearish trend since early February. Currently the Australian dollar seems to be contained in a trading range as no follow-through buying or selling is present. The upper end of the trading range can be found at 0.6785, which aligns nicely with the 200-day moving average, while support is at 0.6700, which aligns with early January’s support level. A break to the downside would then open the door for the price to target the 50% retracement level from October’s 2022 bullish move at 0.6659.
The 200-day moving average is hovering just above the trading range at 0.6789, while the 50-day moving average is far away from the current price of 0.6895. The stochastic is showing price to be stretched as it lurks below in oversold territory, which also implies strong bearish pressure coming into the currency pair.
CANADIAN DOLLAR
The Canadian dollar is currently eyeing to test last year’s December high at 1.3680 as price maintains its bullish bias, especially with the Bank of Canada holding off on an interest rate hike while the FED continues with their tight monetary policy, which would then favor the bulls and open the door for price to target 1.3750, which is November 2022’s high. The nearest support level is relatively quite far from the current price, which is at 1.35.
The 200-day moving average is currently very far away from the current price of $1.3281, while the 50-day moving average is currently at $1.3456, below the $1.35 support level. Looking at the stochastic, it shows price to be quite stretched as it has hovered in overbought territory since late February and also implies strong bullish pressure coming into the currency pair.
