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Technical Outlook for DXY, USD/CAD, EUR/JPY & More

Technical Outlook for DXY, USD/CAD, EUR/JPY & More

Paul Robinson, Strategist

With USD-pairs having diverging looks we focused on specific set-ups in the group. The short-term picture in DXY is providing better clarity than the macro outlook. There are a couple of USD and cross-rate set-ups presently on the radar.

Highlights:

  • US Dollar Index (DXY) showing better short-term clarity
  • USD/CAD on the cusp of breaking an important trend-line
  • EUR/JPY continues to hammer on support, 'line-in-the-sand' for both sides

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The short-term technical structure for the US Dollar Index (DXY) has more clarity at this time than the longer-term time-frames. On the 4-hr chart a 'bear-flag' is developing beneath resistance in the low-94s. A break of the under-side trend-line of the formation is viewed as a trigger for another leg lower, with 9306 and 9275 as the next levels of support.

US Dollar Index (DXY):4-hr

Technical Outlook for DXY, USD/CAD, EUR/JPY & More

EUR/USD, by default of holding a ~57% weighting in the DXY, is carving out a 'bull-flag'. The key for the euro is the 11660/700 area as support. It will be important to hold if the outlook is to remain constructive, as a strong break below will significantly increase the odds we see another leg lower. To gain momentum bigger picture trade into the 11900s is needed. GBP/USD is stuck in a range between ~13000 and 13300. AUD/USD and NZD/USD both continue to fall further down the rabbit hole. Long-term trend-lines extending back to 2016 and 2009, respectively, are viewed as potential targets before a sustainable bounce can commence. USD/JPY continues its bearish sequence of lower-lows and lower-highs. Still looking to 11160/75 as an important area of targeted support.

USD/CAD is doing a tightrope act on a trend-line off the September low, with the likelihood of it breaking increasing with each attempt to hold. A 4-hr closing bar below is viewed as the trigger to usher in another leg lower. (See here for details on the trade set-up outlined yesterday.)

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USD/CAD:4-hr

Technical Outlook for DXY, USD/CAD, EUR/JPY & More

Cross-rates we looked at included EUR/AUD, GBP/AUD, GBP/NZD, AUD/JPY, CAD/JPY, GBPJPY; but the one we put the most focus on was EUR/JPY. This particular cross continues to press the lower-bounds of a support zone extending back a couple of months. There is also an underside trend-line that ‘keeps it together’. For ‘would-be’ longs this is the 'line-in-the-sand', and for ‘would-be’ shorts a daily close below 13117 will be important. After all the bouncing around it has done from this level a breakdown would likely usher in momentum.

EUR/JPY:Daily

Technical Outlook for DXY, USD/CAD, EUR/JPY & More

For full technical considerations, please see the video above…

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.

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

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