On the daily chart below, we can
see that the price has clearly broken the 1.07 support zone and it’s now approaching
the 1.05 handle. The whole move up from 1.02 to 1.10 in the past few months was
diverging with the MACD.
Generally, when the price breaks
the trendline that was supporting a rising
channel-like price action (like in this case), the price pulls back at least to
the bottom of the channel, which in this instance comes around 1.02. But first
the price will need to break the strong support at 1.05.
On the 4 hour chart below, we can
see that the price lately has been trending down nicely hugging the downward
trendline. The moving
averages were also acting as resistance for every pullback.
The fundamentals are now
favouring the USD as the market reprices a higher terminal rate from the Fed
due to recent beats in many key economic data. One risk here is that the price
is also diverging with the MACD on the way down, so if we get a catalyst
against the USD, we may see a quick pullback into the 1.07 handle.
On the 1 hour chart below, we can
see that recently every pullback to the trendline found sellers. We should
expect the same happening at least until we get to the 1.05 handle.
We are in an environment now
where “good news is bad news” for the pair, so watch out for important economic
reports beating expectations as those will act as catalysts for further USD
appreciation.
