There aren’t a ton of great charts out there right now after having seen some big moves the week before, but still a few notable situations to keep watch of. In the near-term, the dollar became overbought and some backing-and-filling is in order before trying to push higher. With that, the euro could try and retest broken support at 11500 in the week ahead. USD/CNH is on the verge of posting a key-weekly reversal while gold may have bottomed for now on a flush-and-reverse situation.
Technical Highlights:
- USD Index (DXY) backing-and-filling in order
- EUR/USD to back-and-full, potentially test 11500
- USD/JPY could be on the verge of breaking down
- USD/CNH weekly reversal (if holds) points to weakness
- Gold to benefit from weakening dollar after flush-and-reverse
To check out our intermediate-term fundamental and technical outlook on major markets and currencies, see the DailyFX Q3 Forecasts.
USD Index (DXY) backing-and-filling in order
The US Dollar Index (DXY) is beginning to roll over, and after seeing the extended move coming out of the ascending wedge it is due for a breather. How that unfolds will be of significant interest in the days to follow. A benign decline could soon set the dollar up for another run higher in the days ahead. A retest of the top of the wedge or trend-line from April may come into play, but as long as it holds a bullish outlook remains well intact.
US Dollar Index (DXY) Daily Chart
EUR/USD to back-and-fill, potentially test 11500
Next week may bring a retest of the widely-watched 11500 level that the euro broke last Friday. It could offer a solid risk/reward spot from which traders can enter short on a pullback. If sellers show up ahead of time, then a consolidation breakdown trade may present itself on a thorough break of 11300.
EUR/USD Daily Chart (back-and-fill)
Check out the Q3 Euro Forecast for a broader fundamental and technical view.
USD/JPY could be on the verge of breaking down
USD/JPY is close to posting its 3rd weekly reversal in the past five weeks. The inability to hold rallies around resistance suggests we could soon see downside follow-through. A break below the Monday low at 11011 should usher in more selling, with the 108/109 area initially targeted.
USD/JPY Weekly Chart (Unable to hold a rally)
Check out the Q3 Yen Forecast for a broader fundamental and technical view.
USD/CNH weekly reversal (if it holds) points to weakness
As we discussed earlier in the morning, USD/CNH is in the process of cementing a key-reversal bar around the December 2016 high. If the weekly reversal holds in place without a rally today ruining the formation, then downside follow-through could be in store for next week.
USD/CNH Weekly Chart (Key-reversal near completion)
Gold to benefit from weakening dollar after flush-and-reverse
Gold may have very well undergone a capitulation-style bottom this week, with a strong flush-and-reverse in momentum. As long the Thursday low at 1160 holds on a closing basis look for higher prices to unfold as the dollar takes a break from rallying. This trade is tied to CNH (correlation between the two is 97%), so keep an eye on USD/CNH and be mindful of total risk if trading both.
Gold Daily Chart (downdraft & reversal)
Check out the Q3 Gold Forecast for a broader fundamental and technical view
Resources for Index & Commodity Traders
Whether you are a new or an experienced trader, DailyFX has 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
