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Pound corrects higher due to dollar weakness

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Home » Dollar demand eases after a rally

Dollar demand eases after a rally

by Joseph Deen
July 14, 2021 11:49
in Technical analysis
0
Pound corrects higher due to dollar weakness

As the greenback remains relatively strong, the pound will hardly be able to make a decisive break above the 20-DMA in the short term

EURUSD

The dollar rallied nearly across the board on Tuesday after a strong inflation report. Early on Wednesday, the USD index climbed to fresh tops around 92.80 before retreating marginally, as traders proceeded to profit-taking. Against this backdrop, the euro slumped to fresh April lows below 1.1800 before bouncing. Should dollar demand continue to ease, the common currency would get back above the 1.1800 figure, with the focus remaining on the descending 20-DMA, today at 1.1870. On the downside, the immediate support arrives in the 1.1770 area that capped the recent sell-off. On a wider horizon, the technical picture on the weekly timeframes has been deteriorating since late-May.

GBPUSD

The cable regained upside momentum following two days of losses. The pair peaked at 1.3840 at the start of the week but failed to preserve gains and retreated to 1.3800 on Tuesday. Today, the prices rebounded the 1.3860 area where the descending 20-DMA arrives. As the greenback remains relatively strong, the pound will hardly be able to make a decisive break above this moving average in the short term, with upside risks limited as long as GBPUSD stays below the 100-DMA that arrives at 1.3935. On the positive side, the daily RSI is now pointing higher in the neutral territory, suggesting downside risks are limited for the time being.

USDJPY

USDJPY extended the rally to 110.70 early on Wednesday before reversing lower in recent trading as dollar demand has eased. As a result, the pair slipped to the 110.40 area while holding relatively steady following three consecutive days of gains. If the upside momentum reemerges any time soon, the greenback could challenge the 20-DMA again. A decisive break above this moving average that arrives at 110.60 would pave the way towards the 111.00 barrier last seen more than a week ago. On the hourly charts, the key target for dollar bulls arrives at 110.50 where the 20- and 200-SMAs converge. In general, it looks like USDJPY would stay under a modest downside pressure in the near term.

NZDUSD

The Kiwi briefly plunged to 0.6916 for the first time since November 2020 on Tuesday before bouncing strongly. The pair climbed back above the 20-DMA to exceed the 1.7000 figure today. NZDUSD extended the recovery to 1.7030 before retreating marginally. The pair now needs to get back above the 200-DMA that arrives at 1.7067 in order to retarget the peaks around 1.7100 seen earlier this month. A daily close above the mentioned 20-DAM would be a confirmation of the recent breakout. On the four-hour timeframes, there are some modest bullish signs including a slightly bullish bias in the RSI.

USDCAD

USDCAD has settled around 1.2500 on Wednesday, struggling to extend yesterday’s ascent that was capped by the 1.2540 region. The pair remains stuck between the key moving averages, clinging to the upper end of the trading range. As long as the prices stay above the ascending 20-DMA, (today at 1.2400) upside risks continue to persist. On the other hand, the overall technical picture looks neutral, with the daily RSI being directionless around the 62 mark. On the four-hour charts, the downside pressure is being capped by the 20-SMA. A break below this moving average would pave the way towards the 1.2440 region.

Tags: EURUSDGBPUSDNZDUSDUSDCADUSDJPY
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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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