Forex Video Briefing (6/27) – A Look at USD Bearish Development
As we wrap up the week in the forex markets, the USD continues to weaken. Traders were already selling the USD to start the week, and the deep negative GDP revision for Q1 2014 added even more weight.
The USD Index shows a bearish continuation this week after a break below a triangle last week. After consolidating a little around the 200-SMA in the 4H chart, price settled below it to end the week with a new low on the month. The USDX is poised to fall back to the 79.90 support levels seen in May. The top 2 components of the USDX are the EUR/USD and USD/JPY. Let’s take a look at these dollar-crosses:
EUR/USD extended a bull run that began last week from 1.3513. The ability to hold above 1.36 to end the week suggests traders are looking for a bullish correction. Price action, the moving averages, and the RSI in the 4H chart also reflect a market building bullish momentum against a prevailing bearish trend. However the 1.3675 June-high will be key resistance next week. Traders will likely be looking to sell here, at least with the 1.36 level in sight.
USD/JPY broke below a month-long triangle. Note the bearish momentum in the 4H chart as the RSI tagged 30, and has held below 60 since. The RSI reflects bearish continuation momentum this week. as it tags 30 again The next key support levels will be in the 100.76-100.85 area, which contain the low in May, and on the year. If we get a pullback, watch out for resistance in the 101.60-80 area. A break above 102 however would invalidate the bearish outlook. Still, we should limit such bullish outlook to 102.80, because in the 4H chart, the market is sideways, so the further away you go away from the moving averages, the more likely you will get a reversion back towards them.