Since the beginning of the week, the US Dollar index managed to recover most of its Friday’s declines. However, the index remained below the 100 key barrier and below 100.40 solid resistance area, completing its seven weeks of consecutive declines.
The Euro and the British Pound declined sharply against the US Dollar during the first trading day of this week. However, the USDJPY also declined and continued all the way back to 111.60 despite the Dollar rally.
In today’s article, we will take a look at those currencies and how to plan the next trades.
EURUSD
The Euro failed to break above 1.08 for almost two weeks, leading to another short term retracement since the beginning of the week, declining all the way back below 1.0660’s until this report is released.
The Euro managed to stabilize above 1.05 since the beginning of the year, as the ECB seems to be very clear and on course to start tapering the current QE program, which is considered as a positive factor on the medium term.
Yet, since the euro has been rising since the beginning of the year, the technical indicators are heavily overbought on most time frames. Stochastics oscillator traded above 80 for more than a month now. Moreover, it’s finally turning lower, deflating some longs. Furthermore, the RSI also crossed through the 50 midpoint to the downside.
For the time being, today’s move might be the beginning of a short term retracement. To where? The first immediate support stands at 1.0650 followed by 1.06 which represents its 50 DAY MA, which should be watched very carefully, as a breakthrough that support would clear the way for further declines, with a risk to test this year’s lows.
On the upside view, 1.08 remains the key resistance, for the time being, a break above that resistance is needed to strengthen the possibility for another breakout ahead, which may lead to another bull run towards 1.09 for now.
GBPUSD
Looking at the daily chart, the sideway trend continues. GBPUSD has been trading between 1.2750 and 1.21 since the flash crash back in October of last year.
A few days ago, GBPUSD peaked around 1.27, declining all the way back below 1.25 and 1.2360’s today, breaking through its short term uptrend line, which increases the chance for another leg lower ahead.
Technical indicators were also heavily overbought for almost a month. However, both RSI and Stochastic Oscillator turned lower and crossed to the downside.
In the meantime, 1.23 seems to be a reasonable level to keep an eye one in the coming hours. The current move is also considered as impulsive, which might extend for the next few days. Moreover, fundamentals are not on GBP’s side, therefore selling rallies remains the favorable strategy.
USDJPY
The Bank of Japan decided to intervene in the markets last week to put some pressure on the Japanese Yen. However, the Bank of Japan has failed to do so. USDJPY traded slightly higher before declining sharply all the way back to 112.0 areas.
During yesterday’s trading, USDJPY has been trading around 112.0 levels for almost the entire day. However, at the end of the US session, significant stops has been triggered, leading to another sharp leg lower all the way back toward 111.60’s.
As for today, the pair edged higher to retest that 112.0 resistance area, which remains solid so far. This is despite the notable rise in USD Index earlier today.
For the time being, the technical indicators are showing some room for further declines ahead, which may lead USDJPY to keep on declining all the way back to yesterday’s lows. In addition, the 38.2% Fibo retracement stands around 111.27, which may hold for a while. Yet, I wouldn’t be surprised of the retracement continues towards 109.03, which represents its 50% Fibo. Therefore, selling rallies is still a favorable strategy on the short and medium term.
