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Technical Outlook – Is USD a Short? Euro Cross-rate Appeal (Video)

Technical Outlook – Is USD a Short? Euro Cross-rate Appeal (Video)

2018-05-09 11:32:00
Paul Robinson, Currency Strategist
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The US dollar has experienced one of the most aggressive price moves seen in months, and the question is whether it’s overdone and time to short. On the radar are a couple of euro cross-rates which could soon hold appeal from the long-side (EUR/CAD & EUR/NZD).

Technical Highlights:

  • US dollar extended, but is it a short?
  • EUR/CAD and EUR/NZD declining towards trend-lines

For in-depth fundamental and technical analysis for your favorite market or currency, check out the DailyFX Q2 Forecasts.

US dollar extended, but is it a short?

To cut straight away to my take on whether USD is a short – not at this time. It’s been a very extended move out of the bottoming triangle and looks overdone in the near-term, but the thinking on this end is that there is more to go on the upside after a correction, whether the correction happens through price or time. That is, after a pullback or period of horizontal price action where overbought conditions are worked off. Overall, though, there might not be much meat on the bones for shorts.

US Dollar Index (DXY) Daily Chart

US Dollar Index (DXY) daily chart, watch pullback

For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for USD

EUR/USD, the primary driver of the US Dollar Index, could bounce at any time, but doesn’t have any real support levels to lean on as a long candidate. So, while a counter-trend move is quite possible, the path of least resistance is likely to remain down until more significant levels are hit.

A short-term shallow recovery marked by a struggle to gain upside momentum will pique interest in reestablishing short exposure. Looking lower, the low-11700s and then the swing-low from November at 11554 will be targeted over the short to intermediate-term.

EUR/USD Daily Chart

EUR/USD daily chart, bounce due but that may be it

GBP/USD broke significant channel support last week, which has it poised for lower prices. There may be a corrective bounce in store before trading lower, with 13656 up to near 13800 targeted as a zone of interest for establishing new short positions.

Tomorrow is ‘Super Thursday’ and the BoE might inflate some life into cable, but it generally looks headed down. The area around 13300 sticks out as a potential point of support down to near 13000 on further weakness.

GBP/USD Weekly Chart

GBP/USD weekly chart, broken channel, lower-low

GBP/USD Daily Chart

GBP/USD daily chart, watch how it reacts should it reach the 'reaction zone'

For the intermediate-term fundamental/technical outlook, check out theQ2 Forecast for Euro & Pound

EUR/CAD and EUR/NZD declining towards trend-lines

The following couple of crosses aren’t there yet but have trend-lines with solid inflection points along with the 200-day MA passing right in their vicinity. EUR/CAD has a steady trend-line rising up from February 2017 in near confluence with its 200-day. A strong rejection from trend support is seen as a catalyst for a recovery bounce at the least, if not a resumption of the trend higher dating back to last year.

EUR/CAD Daily Chart

EUR/CAD daily chart, trend-line and 200-day MA in confluence, watch price action on touch

EUR/NZD isn’t as clean, but nevertheless has a strong trend-line coming up from February of last year, as well. It’s 200-day doesn’t currently have the same confluence as does the trend-line/200-day in EUR/CAD, but it’s creeping up not far below. As is the case with euro-cad, a drop into the trend-line and forceful rejection will have eyes pointed higher.

EUR/NZD Daily Chart

EUR/NZD daily chart with trend-line, 200-day, watching price action on touch

We also looked at USD/JPY, AUD/USD, NZD/USD, USD/CHF, USD/CAD, GBP/JPY, AUD/JPY, EUR/JPY, NZD/JPY, AUD/NZD, and gold.

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---Written by Paul Robinson, Market Analyst

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