The U.S. Dollar Index (DXY) broke through a confluence of support, triggering a sizable wedge pattern; this sets it up for lower prices over the intermediate-term. Bounces will develop at times, though, and these may give would-be shorts an opportunity to enter bearish wagers. The Euro at resistance, could pull back to support soon. USDCAD looks to be in trouble on the weekly time-frame, near-term resistance could soon get hit. GBPUSD weakness could lead to development of bottoming price pattern.
- Dollar Index (DXY) counter-trend bounce could develop
- EURUSD pullback to support may provide spot for longs
- USDCAD headed lower big-picture, watch resistance
- GBPUSD pullback will help further a bottoming pattern
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Dollar Index (DXY) counter-trend bounce could develop
Last week, the US Dollar Index (DXY) closed a weekly candlestick outside of a rising wedge pattern and below confluent support that involved the bottom of the formation and the 200-day MA. This sets USD up for lower prices, but there will be bounces along the way.
Right now, support from March is in play. A bounce from there could offer up an opportunity for would-be shorts to enter for a move to the next set up of support levels carved out in January in the vicinity of 95.16/03.
US Dollar Index (DXY) Weekly Chart (broke wedge formation)
US Dollar Index (DXY) Daily Chart (trying to bounce from support)
EURUSD pullback to support may provide spot for longs
In reverse of the DXY, the Euro broke a falling wedge formation. EURUSD is currently challenging levels from March; a pullback from around here will have the June 7 high and 200-day combo in focus right around 11350. Below there a retest of the January trend-line might take shape. As long as the rally doesn’t turn into a swift down-move as other rallies have since last year, then the Euro may be set up soon to keep on extending the wedge-break.
EURUSD Daily Chart (watch pullback to support)
USDCAD headed lower big-picture, watch resistance
USDCAD is showing little to no life at this juncture after breaking down out of a longer-term channel structure. It looks poised to do as it did a couple of years ago. In the event of strength, watch the 13238 up to 13300 area for signs of stalling upward momentum. Overall, rallies and/or consolidations look set to turn into new swing-lows for the foreseeable future.
USDUSD Weekly Chart (looks like a repeat of 2017)
USDCAD Daily Chart (weak bounce, resistance ahead)
GBPUSD pullback will help further a bottoming pattern
Cable traded around the October 2016 trend-line for a couple of weeks, and on a daily basis depending on how it was drawn, it broke through at one point. With last week’s bounce and close on a weekly basis above the trend-line, I moved it to beneath the weekly low while still allowing it to maintain its integrity in connecting lows from October 2016, early 2017, very near the January flash-crash low, and the low from a week ago today.
This will be the long-term line-in-the-sand I will work with. A pullback from here could, could set up an inverse head-and-shoulders (H&S) pattern. This is only a scenario but may be a worthy one given long-term support and the generally poor posturing of the Dollar against other currencies. For now, in ‘wait-and-see’ mode until further price action confirms outlined scenario.
GBPUSD Daily Chart (inverse H&S > long-term t-line?)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX