Where next for these USD pairs?

Summary:

• EURUSD bounces from long-term support

• USDJPY shows possible reversal signal

• USDCAD to confirm breakaway gap?

The US dollar has had a good run of late with a trade-weighted index of the greenback rising to its highest level in almost a month yesterday and back above the 95 handle. However the USD index (USDIDX on xStation) showed a large wick overhead on a daily chart, indicating selling pressure and there is some suggestion that the greenback could be set for a reversal. In this analysis we’ll look at 3 USD crosses and describe the latest technical situation for them.

EURUSD - Held key support around 1.15

The most popular USD pair is against the Euro and this market posted a 6th consecutive decline on Tuesday. However a bounce from the key support level at the 1.15 handle - which also broadly coincides with the lower bound of the Bollinger band - has given a chance for the longs and if they can successfully defend this then a recovery higher may lie ahead. The 1.15 level could be seen as the right shoulder in an inverse head and shoulders formation with the region from 1.1815-1.1850 a possible neckline. A failure to stay above 1.1505 however, would negate this and keep the market under pressure with a retest of 2018 lows around the 1.13 handle.

The EURUSD held key support at 1.1505 and may be carving out a right shoulder in an inverse S-H-S formation. A drop below there however would keep price under pressure and threaten a continuation of the recent move lower. Source: xStation  

USDJPY - Bearish engulfing candle on D1

This market has been riding its upper Bollinger band in recent weeks as price has gained around 200 pips. This rally has seen price return to the levels seen around a year ago near the 114 level. Yesterday saw a bearish engulfing candle printed on D1 and this possible reversal signal could mark the end of the move higher. This week’s peak of 114.06 is now a pretty obvious place to look for potential resistance and given that the risk:reward at present seems to favour short positions. A break above 114.06 would negate the signal and it is worth pointing out that a similar setup (bearish engulfing) last week failed and saw a swift move to the upside.

A bearish engulfing candle on D1 represents a possible reversal signal for this market with the region below 114.06 an obvious place to now look for resistance. Source: xStation  

USDCAD - Breakaway gap near confirmation?

The new Northam American trade agreement (USMCA) agreed over the weekend saw this pair begin the week with a sizable gap lower. Traders looking for breakaway gaps often search for 3 consecutive candles to close following the gap to prove that it isn’t a false move and if the market doesn’t move up to Friday’s close (1.2915) today then this will have occurred. Furthermore the market has now seemingly made a decisive break below its 200 day SMA and with the big uncertainty surrounding Canada’s future trade arrangements with its biggest partner eliminated the downside risks for CAD (upside for USDCAD) are greatly diminished.

USDCAD could be set to confirm the breakaway gap today (barring a rally to 1.2915). Price is also below the 200 day SMA and could be set for a sustained push lower. Source: xStation