US DOLLAR WEEKLY TECHNICAL FORECAST: EUR/USD, GBP/USD, USD/CAD CHARTS & LEVELS IN FOCUS
- The US Dollar Index dropped -2% in April despite rebounding sharply higher into month-end
- EUR/USD price action recoiled nearly 100-pips lower after probing bearish trend resistance
- Pound-Dollar bulls might look to wrestle back control next week and push GBP/USD higher
- USD/CAD seems a bit oversold but the Loonie could remain strong against its US Dollar peer
It was quite a rough month for the US Dollar throughout April. Broad-based US Dollar selling pressure left the DXY Index on pace for a -3% decline at its low point, but thanks to a notable late stage reversal on the final trading day of the month, the Greenback was able to erase some downside. The US Dollar Index finished April -2% lower on balance, which was largely fueled by the Euro advancing 300-pips. EUR/USD price action is the largest component of DXY Index performance with a 57.6% weighting.
US Dollar weakness was reflected across other major currency pairs like GBP/USD and USD/CAD as well. This looked primarily attributable to softer US Treasury yields with the ten-year shedding about 10-basis points. That said, in light of Dallas Fed President Robert Kaplan suggesting that the FOMC should start talking about tapering policy, potential for the US Dollar to continue its rebound next week is front and center. What are the key technical levels worth keeping an eye on for EUR/USD, GBP/USD and USD/CAD?
EUR/USD PRICE CHART: DAILY TIME FRAME (10 NOVEMBER 2020 TO 30 APRIL 2021)
Chart by @RichDvorakFX created using TradingView
Jitters from the onset of Fed taper talks may have provided the US Dollar with a bullish fundamental catalyst, but looking at a daily EUR/USD chart, it appears that the sharp move lower was technically charged too. We can see that the latest pullback by EUR/USD roughly coincided with its descending trendline extended through the 06 January and 25 February swing highs.
| Change in | Longs | Shorts | OI |
| Daily | 1% | -5% | -2% |
| Weekly | 19% | -14% | -2% |
EUR/USD price action started to lose upward momentum prior to this as suggested by the MACD indicator. The shrinking Bollinger Band width and relative strength index approaching ‘overbought’ territory both pointed to pullback potential as well. An extension of the US Dollar rebound might bring the 38.2% Fibonacci retracement and 20-day simple moving average into focus for EUR/USD bears. Below this possible area of technical support is the 50-day simple moving average, which, if breached, could expose year-to-date lows.
GBP/USD PRICE CHART: DAILY TIME FRAME (26 OCTOBER 2020 TO 30 APRIL 2021)
Chart by @RichDvorakFX created using TradingView
GBP/USD price action has lacked direction for the last couple months. The cable has been broadly rangebound between 1.3670-1.4000 as highlighted on the daily chart above. These respective levels of technical support and resistance look likely to keep GBP/USD relatively contained. This is considering how the barriers are reinforced by its Bollinger Bands, which statistically speaking, encompass price action 68% of the time.
| Change in | Longs | Shorts | OI |
| Daily | 4% | -7% | -3% |
| Weekly | -7% | 22% | 8% |
The 20-day simple moving average could serve as an insightful barometer for the tug-of-war match between GBP/USD bulls and bears. That said, the US Dollar could struggle to sustain its rebound versus the Pound Sterling. This is in light of the long-term bullish trendline and 50-day simple moving average perched right below GBP/USD price action.
USD/CAD PRICE CHART: DAILY TIME FRAME (09 DECEMBER 2020 TO 30 APRIL 2021)
Chart by @RichDvorakFX created using TradingView
USD/CAD price action extended its slide by another 190-pips last week despite broader US Dollar strength. The Loonie has traded favorably against its US Dollar cousin for a while and arguably leaves USD/CAD looking oversold now. This is highlighted by the relative strength index. If a rebound does come into play, USD/CAD bears might look to fade the 20-day simple moving average before the 1.2600-price level comes into the crosshairs.
| Change in | Longs | Shorts | OI |
| Daily | 32% | -19% | 4% |
| Weekly | 77% | -31% | 5% |
The bearish descending trendline extended through the series of lower highs likely stands to keep exerting downward pressure on USD/CAD price action. After all, it is important to remember that the trend is your friend more often than not. This brings to focus the 1.2250 and 1.2065 price levels, which respectively underpin the early 2018 lows and 2017 swing low, for potential technical support.
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
