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Pound corrects higher due to dollar weakness

No reprieve for dollar as risk-on tone persists

December 17, 2020 08:37
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Home » No reprieve for dollar as risk-on tone persists

No reprieve for dollar as risk-on tone persists

by Joseph Deen
December 17, 2020 08:37
in Technical analysis
0
Pound corrects higher due to dollar weakness

If the EU-UK negotiations conclude on an upbeat note, the pound could jump to fresh long-term tops despite the nearly overbought conditions

EURUSD

EURUSD jumped to 1.2243 for the first time since April 2018 earlier in the day. The pair has retreated marginally since then but remains elevated, signaling its readiness to extend the rally after a short-term pause. To confirm the latest breakout, the common currency needs to stage a daily close above the 1.2200 level. Now, as the daily RSI has entered the overbought territory, a local downside correction could take place before traders proceed to another bull run. On the hourly timeframes, the pair needs to hold above the ascending 20-SMA (today at 1.2202) in order to avoid a deeper retreat in the immediate term.

GBPUSD

GBPUSD rose to 1.3600 for the first time since May 2018 during the European hours, having accelerated the rally after a break above the 20-DMA earlier in the week. The pair derived support from a combination of a weaker dollar and positive Brexit developments toward a highly-anticipated trade deal. If the EU-UK negotiations conclude on an upbeat note, the pound could jump to fresh long-term tops despite the nearly overbought conditions as the daily RSI is flirting with the 70 threshold. On the four-hour timeframes, the pair has settled above the key moving averages since Tuesday, adding to the bullish short-term technical picture.

USDJPY

USDJPY plunged to fresh march lows just above the 103.00 handle, a break below which could pave the way to 101.00. The pair’s decline has accelerated after failed attempts to hold above the descending 20-DMA (today at 104.05) earlier this week. Despite a massive sell-off witnessed since Tuesday, the daily RSI hasn’t entered the oversold territory just yet, which implies the downside pressure could persist, and the dollar could challenge the 103.00 figure. If so, the next support should be expected at 102.40, followed by the 102.00 handle. If the 103.00 level triggers a local reversal, the greenback may try to regain the mentioned moving average in a potential upside correction.

XAUUSD

Gold prices rose to one-month highs on Thursday due to broad-based weakness in the dollar. Earlier during the European hours, the bullion extended gains to $1,883 but failed to preserve gains and retreated to $1,874 in recent trading. Despite the local correction, the precious metal could make another bull run after a breath as the daily RSI is pointing higher in the neutral territory, and there is further room on the upside both in the short- and medium-term. However, XAUUSD remains on the defensive in a wider picture, at least as long as the prices stay below the 20-weekly MA that arrives marginally above the $1,900 figure.

NZDUSD

The Kiwi has accelerated the rally on Thursday, climbing to fresh April-2018 highs around 0.7165 in recent trading. As a result, the daily RSI has entered the overbought territory and continues to point north. However, it looks like the pair could continue to ascent in the short term, targeting the 0.7200 handle. Of note, the crucial 200-weekly moving average arrives in the 0.7225 area that could act as strong resistance and trigger a bearish correction if the prices manage to overcome the 0.7200 figure in the short term. On the four-hour charts, NZDUSD is back above the ascending 20-SMA, adding to the upbeat near-term technical picture. On the downside, the immediate support now arrives at 0.7120.

Tags: EURUSDGBPUSDGoldNZDUSDUSDJPYXAUUSD
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Joseph Deen

Joseph Deen

Joseph is a technical analysis expert. A graduate of NYU, Joseph has a master's degree in mathematics. On FWNews, Joseph provides exchange rates reviews and forecasts.

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