Forex Trading Library

Dollar Advances But Sideways Range Continues

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The U.S. dollar briefly posted a fresh 14-year high yesterday at 103.81 but pulled back to close the day at 103.23. Price action remains broadly flat with 103.50 seen as a strong resistance level that is proving hard to be broken. On the economic front, the dollar gained on better than expected ISM manufacturing PMI. Looking ahead, today’s FOMC meeting minutes will be the key risk for the markets. Although the Fed has communicated its hawkish view on three rate hikes this year, the meeting minutes could see the markets posting a knee-jerk reaction to any new information that hasn’t yet been discounted already.

USDJPY daily analysis

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USDJPY (118.10): The U.S. dollar managed to retrace the recent declines off 118.00 as price posted a smooth reversal after briefly trading a few pips above 116.00. USDJPY rallied above 118.00 in yesterday’s session before pulling back and the greenback is seen making attempts to push higher above 118.00 in today’s early Asian trading session. The daily chart for USDJPY continues to show that the momentum remains in the overbought level which heightens the risk of a pullback in prices in the near term. There is also a bearish divergence to the Stochastics on the daily chart validating this view. In the near term, further gains can be expected only on a convincing close above 118.00 while the risks of a correction could see the dollar slip towards 114.00.

GBPUSD Intra-day analysis

GBPUSD Intra-day analysis

GBPUSD (1.2245): GBPUSD continues to consolidate near the 1.2200 support zone as the currency closed bearish yesterday despite strong than expected manufacturing PMI. However, robust figures from the U.S. continue to keep the U.S. pinned to the upside sending GBPUSD briefly tumbling to test 1.2200 support. Still, with price now back testing the support level, GBPUSD could be aiming for another attempt to push higher. 1.2400 remains a likely resistance level of interest to the upside followed by further gains that could see GBPUSD retest 1.2570 – 1.2550 resistance level being retested. On an alternative note, with GBPUSD falling back into the support level of 1.2250 – 1.2224, a daily close below 1.2200 could trigger further downside in prices, invalidating the near term bullish correction to 1.2400. On the economic calendar today, UK’s construction PMI will be the next main event risk with forecasts showing a modest decline to 52.6 in December, from 52.8 previously.

USDCHF daily analysis

USDCHF daily analysis

USDCHF (1.0277): The U.S. dollar has been trading flat against the Swiss franc over the past few daily sessions, but with price breaking out of the rising wedge pattern the bias is shifting to the downside for a correction towards 0.9950. Resistance is seen being established at 1.02900 where price action as repeatedly failed to breakout higher. Strong range that was established yesterday is likely to see price action result in an inside bar today which could signal a near term breakout. To the upside, USDCHF needs to be post a convincing close above 1.0290 for price action to push higher while to the downside, the correction to 0.9950 is pending for a retest of support. Watch the daily Stochastics which is currently showing a bearish divergence that could signal the corrective move towards 0.9950.

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