Assessing the Greenback Recovery

After 2 major event risks, last Friday’s NFP and This Tuesday’s FOMC announcement, the USD is looking poised to making a recovery from its recent weakness. Global risk aversion may be the factor behind USD strength this week, as it is a safety currency. However, the dollar is not in the clear yet. It is going to be dealing with some technical levels in many crosses. Let’s see evaluate the scenarios

For the weekly fundamental analysis update visit: Live Coverage

EUR/USD Testing Support at 1.2750; Monitoring 1.2450

• Daily: The EUR/USD may be in wave 4 of a bullish impulse wave. It is testing the 1.2750 level which may provide support. It if it breaks below this level, it may come down to the 50%, or 61.8% retracement level.
• The key thing to monitor is whether the market will break below 1.2450.
• Another thing to monitor is the RSI. It should not go below 40 for the bullish scenario to continue for EUR/USD.
• With that said, The USD may enjoy some further strength in the coming week, but its strength will be tested against the Euro’s that was shown in June and July.

USD/JPY – Assessing the Reversal Scenario (Link)

GBP/USD Next Resistance near 1.63

• 1H: During last week’s Chartist Corner, a trader asked me if the GBP/USD would go to 1.62. I believe the pair can go to 1.6235 area, but mentioned that it may go back down to 1.55 first because the market was overbought.
• This week, the market did exactly that and declined to just above the 1.55 area by Friday.
• The pair is now going to test this area with multiple support factors. They are 50% retracement, previous resistance, 200SMA.
• If the RSI stays above 40, and there is a rally, the bullish scenario remains.
• Then, we can expect some resistance at 162/163 area.

USD/CAD Back at the Central Pivot 1.04

• 1H: The USD/CAD rebounded after briefly penetrating the minor support at 1.02. The market reached almost 1.01 before rallying.
• This pair is now back to the central pivot at 1.04, and is in the equilibrium of its range between 1.08 and 1.00.
• No opinion directly from this pair. However, broad dollar recovery may give it some bullish bias. Also, if the RSI breaks 60, it is confirming for the bullish outlook in the short-term. However, by that time, price action may already be telling of this.
• One more time, look for broad sense of USD strength to assess the bias for USD/CAD as it is at equilibrium.

EUR/GBP – A Bearish Outlook for the Euro

• Daily and 4H: The 4H chart shows that this week’s action followed our anticipation from last week’s update on Friday. The market did indeed follow through after the negative reversal signal.
• The market broke below the rising trendline near 0.83. This is also known as a counter-trend breakout signal. There may be some support near 0.8160. We see in the daily chart that 78.6% retracement resides here.
• However, the intermediate outlook continues to be bearish as the RSI in the daily broke below 40.
• Also, the market has a chance to follow through the negative reversal target (0.7840) suggested in the daily chart.
• Therefore, the supports to monitor as the market slides are 0.8160, 0.8060, and the 0.7840 target.

AUD/USD Stalking Path to 0.94/0.95 area.

• Daily and 4H: The AUD/USD declined as broad dollar strength took over this week. This was anticipated last Friday. As a matter of fact the green projection was left from last Friday’s analysis, and the market has behaved almost exactly as anticipated.
• The count is therefore wave (IV), which should not break below the 0.8850 area for the bullish wave counts to be correct.
• A rally from there can be seen as wave 3 and targets 0.94/0.9450 area.
• This scenarios challenges the scenario of continuing USD strength.
• In any case, I anticipate some near-term bearish action to dig into the 0.89/0.8850 zone. Then if there is bottoming action there, I would anticipate a rally towards 0.91.
• The 0.94 target needs some further confirmation.

GBP/JPY Breaking Above Congestion Pattern

• 4H: The GBP/JPY pair in the daily is projected towards 140/140.50 area. However, this week’s risk aversion is throwing a wrench in that scenario. The market retraced 61.8% of the previous rally to break out of the triangle.
• Now, the market tests the triangle’s support.
• The 4H chart shows the market consolidating above this 133.00 support level.
• The intermediate term bullish scenario is still valid, although this week’s price action makes it less likely.
• However, if the market can rally above the 61.8% retracement level near 135.40, then we may be continuing the bullish attempt. Note this area is also the SMA-50 which would be providing resistance.
• Also, a break above 60 in the RSI is confirming of the bullish scenario as well.
• On the other hand, if risk aversion persists, and the GBP/JPY breaks below 133.00, we may have support at 131. If the market breaks below 131, then it can slide to the 126.80 area.

Fan Yang
Currency Analyst
Commodity Trading Advisor
fyang@fxtimes.com

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.