USD/NOK Stays in Bear Flag; USD/CHF, USD/SEK Break Current Uptrends

US Greenback Outlook:

• April is the worst month of the 12 months for the US Greenback (through the DXY Index) from a seasonal perspective, leaving it inclined to weak spot over the subsequent few weeks.
• USD/CHF charges have been following US Treasury yields (just like USD/JPY), however USD/NOK and USD/SEK are appearing like extra risk-on/risk-off pairs.
• Based on the IG Shopper Sentiment Index, USD/CHF has a bearish bias.

Non-Main USD-crosses Look Bearish

You’ve heard it rather a lot in latest days: we’re within the midst of the worst month of the 12 months for the US Greenback. This level bears repeating as a result of seasonal tendencies like earnings repatriation in Japan or Sweden can have a profound impression on cross-border international trade flows. The macro mixture of secure world bond yields, robust financial knowledge, and falling volatility speaks to a rising urge for food for danger. It’s towards this backdrop that the seasonal tendency for US Greenback weak spot is intriguing, as these are the situations that sometimes favor US Greenback weak spot throughout regular (e.g. non-pandemic) occasions.

Though given much less consideration than their main European contemporaries, a trio of USD-pairs warrant dialogue (by the way, two of the three pairs are minor elements of the DXY Index). USD/CHF charges have been following US Treasury yields (just like USD/JPY), however USD/NOK and USD/SEK are appearing like extra risk-on/risk-off pairs. If April is certainly the worst month of the 12 months for the US Dollar from a seasonal perspective, then it might stay inclined to weak spot over the subsequent few weeks through this trio of European currencies.

USD/NOK RATE TECHNICAL ANALYSIS: WEEKLY CHART (Might 2014 to April 2021) (CHART 1)

Having a look on the weekly timeframe, it seems that USD/NOK charges are within the midst of a bear flag consolidation in context of the previous transfer, which was a gentle decline from the March 2020 excessive. Concurrently, the bear flag consolidation is going on after USD/NOK dropped beneath the ascending trendline from the Might 2014 and March 2018 lows (which briefly held as assist in August 2020 earlier than giving approach in November 2020).

Though momentum indicators have eased off their excessive bearish readings, there was no restoration in worth motion – an indication that the market is digesting the transfer earlier than persevering with decrease. The largest signal of confidence USD/NOK charges would possibly provide {that a} bearish breakout is gathering tempo can be if the pair achieved a weekly shut 8.2453, the 61.8% Fibonacci retracement of the Might 2014 low/March 2020 excessive vary.

USD/SEK RATE TECHNICAL ANALYSIS: DAILY CHART (October 2016 to April 2021) (CHART 2)

USD/SEK charges have pulled again sharply over the previous two weeks, failing to return into the rising parallel channel drawn from the December 2016 and March 2020 highs once more the February 2018 and August 2020 lows. In failing to retake the channel in latest weeks, USD/SEK additionally misplaced its uptrend from the February and March 2021 swing lows. This additionally constitutes a failure beneath the 23.6% Fibonacci retracement of the 2020 excessive/2021 low vary at 8.6776, an indication that the rebound has misplaced its muster.

Momentum is popping bearish reasonably shortly following the lack of the February and March uptrend. USD/SEK charges are beneath their every day 5-, 8-, 13-, and 21-EMA envelope, which is sort of aligned in bearish sequential order. Every day MACD is pulling again whereas above its sign line, whereas every day Sluggish Stochastics are on the precipice of breaking beneath their median line. USD/SEK charges might quickly be heading again in direction of the 50% Fibonacci retracement of the March 2014 low/March 2020 excessive at 8.3951.

USD/CHF RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to April 2021) (CHART 3)

USD/CHF charges have turned the nook in a significant approach, dropping again from falling channel resistance firstly of the month. Falling beneath a cluster of Fibonacci retracements measured from the 2019 excessive/2021 low vary and the 2020 excessive/2021 low vary. In doing so, important harm has been inflicted upon the momentum profile, which is shortly aligning in a bearish method. Whereas not in bearish sequential order, USD/CHF charges are beneath the whole thing of their every day EMA envelope. Every day MACD’s drop is accelerating, even when it stays above its sign line. In the meantime, every day Sluggish Stochastics have already dropped by way of their median line. A return again to 0.9200 could also be within the speedy future.

IG Shopper Sentiment Index: USD/CHF Fee Forecast (April 8, 2021) (Chart 4)

USD/CHF: Retail dealer knowledge exhibits 69.43% of merchants are net-long with the ratio of merchants lengthy to quick at 2.27 to 1. The variety of merchants net-long is 6.05% larger than yesterday and 25.78% larger from final week, whereas the variety of merchants net-short is unchanged than yesterday and 21.09% decrease from final week.

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

Merchants are additional net-long than yesterday and final week, and the mix of present sentiment and up to date modifications provides us a stronger USD/CHF-bearish contrarian buying and selling bias.

— Written by Christopher Vecchio, CFA, Senior Forex Strategist