Rally Fizzling, Bears Retaking Management

Technical Forecast for the US Greenback: Impartial

• The US Greenback (by way of the DXY Index) noticed all of its weekly features evaporate following the Might US nonfarm payrolls report as US Treasury yields receded.
• Web-long US Greenback positioning has climbed for 4 consecutive weeks.
• The IG Shopper Sentiment Index suggests that the US Greenback has a impartial bias throughout the board, however for USD/JPY charges, which is bearish.

US Greenback Charges Week in Overview

The US Greenback (by way of the DXY Index) was off to a powerful begin by the primary week of June till it bumped into the Might US nonfarm payrolls report on Friday. Receding US Treasury yields across the knowledge provoked a big technical reversal within the DXY Index, seeing the gauge shut out the week solely up by +0.09% after being up by +0.63% at its weekly excessive. Because of this, many USD-pairs have lengthy wicks on the weekly charts, suggesting that US Greenback promoting stress stays because the calendar strikes into the second week of June.

For full US financial knowledge forecasts, view the DailyFX financial calendar.

EUR/USD RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to June 2021) (CHART 1)

EUR/USD charges retraced their early week losses to settle above former consolidation resistance that outlined worth motion beginning in mid-April. Bullish momentum has waned, with the pair intertwined amongst each day 5-, 8-, 13-, and 21-EMA envelope, which remains to be in neither bearish nor bullish sequential order. Every day MACD is falling whereas above its sign line, and each day Sluggish Stochastics are dropping by their median line. Extra stability in worth motion is sought earlier than or not it’s discerned if EUR/USD charges are monitoring in the direction of the 2021 excessive at 1.2350.

IG Shopper Sentiment Index: EUR/USD Price Forecast (June 4, 2021) (Chart 2)

EUR/USD: Retail dealer knowledge reveals 36.61% of merchants are net-long with the ratio of merchants brief to lengthy at 1.73 to 1. The variety of merchants net-long is 21.22% decrease than yesterday and seven.24% greater from final week, whereas the variety of merchants net-short is 10.59% greater than yesterday and a pair of.23% decrease from final week.

We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests EUR/USD costs might proceed to rise.

Positioning is extra net-short than yesterday however much less net-short from final week. The mixture of present sentiment and up to date adjustments offers us an additional combined EUR/USD buying and selling bias.

GBP/USD RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to June 2021) (CHART 3)

It’s been beforehand famous that “extra features could also be forward because the pair seeks to reclaim the bottom of the aforementioned descending triangle in addition to the yearly excessive at 1.4241.” GBP/USD charges traded greater by 1.4241 on Monday, June 1, fulfilling our expectation.

Now, GBP/USD charges proceed to hug the ascending trendline from the March and November 2020 lows, the pandemic uptrend, which has began to function extra formidable resistance in current days.However there’s technical proof that GBP/USD charges should still have bullish tendencies within the short-term.

GBP/USD charges are nonetheless treating the each day 21-EMA as help, which has been the case for the previous 5 weeks. Every day MACD is falling whereas above its sign line, and each day Sluggish Stochastics are dropping by their median line. The context of worth motion and the technical research means that GBP/USD charges are possible working off short-term overbought situations earlier than persevering with greater.

IG Shopper Sentiment Index: GBP/USD Price Forecast (June 4, 2021) (Chart 4)

GBP/USD: Retail dealer knowledge reveals 37.62% of merchants are net-long with the ratio of merchants brief to lengthy at 1.66 to 1. The variety of merchants net-long is 29.11% decrease than yesterday and 13.83% greater from final week, whereas the variety of merchants net-short is 16.01% greater than yesterday and 4.86% decrease from final week.

We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-short suggests GBP/USD costs might proceed to rise.

Positioning is extra net-short than yesterday however much less net-short from final week. The mixture of present sentiment and up to date adjustments offers us an additional combined GBP/USD buying and selling bias.

USD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (June 2020 to June 2021) (CHART 5)

In the prior USD/JPY fee forecast replace, it was famous that “USD/JPY charges could also be beginning to funnel into the vertex of a symmetrical triangle that’s materialized in opposition to the downtrend from the March and April swing highs and the uptrend from January, February, and April swing lows. Contextually, the anticipated consequence is for a bullish decision, on condition that the previous transfer was a rally following the break of the descending trendline from the June 2015 and September 2018 highs.If US Treasury yields can flip greater, USD/JPY could also be one of many few locations of solace for USD bulls, even when different USD-pairs are struggling.”

Whereas USD/JPY charges did certainly commerce greater out of the symmetrical triangle, worth motion on the finish of final week yielded a capturing star candle on the weekly timeframe. Concurrently, the pair fell again to the ascending trendline from the January, February, and April swing lows, in addition to a cluster of Fibonacci retracements. Even when USD/JPY’s technical research level to bullish momentum, there’s good purpose to have doubt; failure beneath the each day 21-EMA at 109.31 could be a topping sign.

IG Shopper Sentiment Index: USD/JPY Price Forecast (June 4, 2021) (Chart 6)

USD/JPY: Retail dealer knowledge reveals 55.26% of merchants are net-long with the ratio of merchants lengthy to brief at 1.24 to 1. The variety of merchants net-long is 6.22% greater than yesterday and 22.71% greater from final week, whereas the variety of merchants net-short is 22.25% decrease than yesterday and 15.20% decrease from final week.

We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests USD/JPY costs might proceed to fall.

Merchants are additional net-long than yesterday and final week, and the mixture of present sentiment and up to date adjustments offers us a stronger USD/JPY-bearish contrarian buying and selling bias.

CFTC COT US Greenback Futures Positioning (June 2020 to June 2021) (Chart 7)

Lastly, positioning, in keeping with the CFTC’s COT for the week ended June 1, speculators elevated their net-long US Greenback positions for the fourth week in a row to 4.259 contracts, up from 2,780 contracts held within the week prior. Web-long US Greenback positioning has been holding regular for the previous 10 weeks.

— Written by Christopher Vecchio, CFA, Senior Forex Strategist