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Will the US Dollar Breakout Last? A Glance at EURUSD, GBPUSD & USDJPY Charts

Will the US Dollar Breakout Last? A Glance at EURUSD, GBPUSD & USDJPY Charts

Paul Robinson, Strategist

The U.S. Dollar Index (DXY) finally broke out yesterday, and with the break having conviction are we finally on the verge of a sustained USD move? As long as the index stays above 97.71 that looks to be the case for now. Given the extended, coiled up wedge price had been stuck in it is reasonable to look for the DXY to trade up to 100. A failure back below 97.71 will put a damper on the outlook but won’t necessarily turn the bias bearish. For now, running with the breakout until signs show up that it’s another false move in a low volatility environment.

US Dollar Index (DXY) Daily Chart (Breakout in play...)

US Dollar Index (DXY) Daily Chart, breakout in play...

EURUSD worst levels since June 2017, more losses anticipated

The Euro is ~57% of the DXY, and as such it is the primary driver. Yesterday’s break has EURUSD trading below the March and April lows, with a trend-line from 2015 in focus along with a minor swing low from June 2017 and the underside trend-line from November 2017. For the most part these support lines are angled with the downward trend, giving them less weight than if they were rising up to help support price.

With that in mind, a breakdown below all lines (<11000) should have the Euro rolling downhill solidly, and at that juncture one has to start thinking about the French election gap that was never filled at 10724.

We still have to be a little cautious here as drops to lows (and short-term rallies) in the Euro have been met by reversals for the past several months in what has amounted to one of the most difficult trading environments in years. But there is some hope here that we see a sustainable move and FX volatility in general pick up.

See what fundamental factors are in play for EURUSD in the Q2 Euro Forecast.

EURUSD Daily Chart (watch support below)

EURUSD daily chart, watch support below

GBPUSD broke down out of wedge, watch for sustainability

Cable broke the wedge we discussed last week, giving it a go on the downside. The first level up as support is the swing-low from February at 12773, and if GBPUSD sellers turn really aggressive then the extended target will be down towards 12500. For now, sticking with the first target. Turning the outlook neutral to possibly bullish will be a turn back up above the top-side trend-line of the wedge just over the 13000-mark.

See what fundamental factors are in play for GBPUSD in the Q2 Pound Forecast.

GBPUSD Daily Chart (Wedge broke)

GBPUSD daily chart, wedge broke

USDJPY stalling, but still poised to go higher

USDJPY had a nice break higher going for it yesterday but has since reversed course a bit. This has been generally a difficult pair with volatility dropping to multi-decade lows recently. With that said, a little more patience is needed. USDJPY needs to maintain above 11165 to keep a bullish outlook. The targeted zone of resistance clocks in around 11265/330.

See what fundamental factors are in play for USDJPY in the Q2 Yen Forecast.

USDJPY Daily Chart (Holding onto support for now)

USDJPY daily chart, holding onto support for now

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held at 9 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.

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Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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