US DOLLAR WEEKLY TECHNICAL OUTLOOK: DXY, EUR/USD, GBP/USD, AUD/USD
The US Greenback traded on its entrance foot all through most of January in a rebound try off 34-month lows. On stability, the broader DXY Index recorded a 0.71% month-to-month achieve.US Greenback energy appeared to correspond with a rise in demand for safe-haven currencies as market sentiment deteriorated and volatility accelerated.
This relationship is highlighted by the commonly robust constructive correlation between the DXY Index and S&P 500-derived VIX Index. US Greenback bulls might discover motivation to make one other advance if dealer threat urge for food continues to melt and propels the VIX ‘fear-gauge’ increased. Nevertheless, it’s possible that US Greenback promoting strain would resume if there’s a retracement decrease within the VIX Index from present ranges.
DXY & VIX INDEX OVERLAID PRICE CHART: DAILY TIME FRAME (24 AUG 2020 TO 29 JAN 2021)
Chart by @RichDvorakFX created utilizing TradingView
Taking a look at a day by day chart of the US Greenback Index we will see that an inverse head-and-shoulder sample seems to have fashioned. This brings bullish reversal potential into focus, which may very well be confirmed by a breakout above the 91.10-price degree. Overcoming this impediment may tee up a fast transfer to the 92.00-handle roughly underpinned by the 100-day easy shifting common.
Though, the US Greenback is at the moment contending with technical resistance posed by its negatively sloped 50-day easy shifting common. To not point out, the higher Bollinger Band could proceed holding a lid on bouts of US Greenback energy. Odds of a sustained rebound may very well be undermined if the DXY Index fails to defend its bullish short-term trendline connecting the string of upper lows since 06 January.
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EUR/USD PRICE CHART: DAILY TIME FRAME (21 OCT 2020 TO 29 JAN 2021)
The course of the broader US Greenback stands to reflect EUR/USD value motion. That is owing to the truth that EUR/USD is the most important part of DXY Index efficiency with a 57.6% weighting. As such, it’s unsurprising that the US Greenback has staged a rebound with EUR/USD weakening almost 200-pips from its current swing excessive.
EUR/USD value motion might proceed dealing with downward strain because the relative energy index factors decrease and emphasizes the short-term bearish pattern. Confluent help highlighted by the 38.2% Fibonacci retracement on the chart above has proved formidable to this point, nonetheless. This space may assist hold EUR/USD afloat going ahead.
Eclipsing the 22 January shut, maybe coinciding with a bullish MACD crossover, might invalidate the short-term downtrend and put a retest of year-to-date highs again on the desk. Alternatively, taking out the January lows could correspond with a deeper pullback towards the psychologically-significant 1.2000-price degree earlier than the 1.1800-handle comes into consideration.
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GBP/USD PRICE CHART: DAILY TIME FRAME (05 OCT 2020 TO 29 JAN 2021)
GBP/USD value motion trades roughly flat year-to-date after carving out a unstable 308-pip buying and selling vary all through January. Bullish momentum behind the Pound-Greenback has sputtered out across the 1.3700-handle, however in gentle of continued increased lows, an ascending triangle sample appears to have developed.
This formation highlights a interval of consolidation and brings to focus potential for a continuation of the present uptrend. The weekly implied excessive of 1.3862 may function a attainable topside goal, which is derived from GBP/USD one-week implied volatility of 8.1%.
If US Greenback bulls can push GBP/USD value motion beneath its 20-day easy shifting common, nonetheless, a deeper pullback might come into play. Breaching this nearside help degree could discover the 11 January swing low and backside Bollinger Band eyed as the subsequent potential layer of protection.
| Change in | Longs | Shorts | OI |
| Day by day | -14% | -6% | -9% |
| Weekly | -25% | 5% | -8% |
AUD/USD PRICE CHART: DAILY TIME FRAME (23 OCT 2020 TO 29 JAN 2021)
AUD/USD value motion has been gravitating decrease because the begin of the 12 months. The sentiment-linked Australian Greenback might stay below strain in opposition to its US Greenback peer if market volatility stays elevated. Foreign exchange choices merchants seem to have a bearish bias towards AUD/USD judging by its one-week threat reversal, which has turned more and more detrimental and at the moment hovers at its lowest studying since 04 November.
That mentioned, the 175-pip decline from its January excessive leaves AUD/USD flirting with a crucial degree of help close to the 0.7625-mark. This space of buoyancy is highlighted by the 50-day easy shifting common and 23.6% Fibonacci retracement on the chart above.
Failing to keep up this degree may encourage AUD/USD bears to set their sights on the 100-day easy shifting common across the 0.7400-handle. Invalidating the downtrend prolonged by way of the most recent stretch of decrease highs might recharge Aussie bulls and gasoline a transfer again towards the 0.7800-level.
— Written by Wealthy Dvorak, Analyst for DailyFX.com
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