It looks like the common currency would stay on the defensive in the coming days or even weeks
The dollar gathers traction on Monday as risk sentiment looks mixed at the beginning of the week. The USD index approaches the 93.50 area during the European hours. EURUSD slipped back below the 1.1700 figure on Monday. The pair continues to derive support from the 1.1685 area but could see deeper losses in the short term if dollar demand persists. If the mentioned zone gives up anytime soon, the 1.1660 area will come back into the market focus for the first time in over a month. In recent trading, the dollar came off highs, pushing the euro back to the 1.1700 area. However, it looks like the common currency would stay on the defensive in the coming days or even weeks due to monetary policy divergence. In the immediate term, EURUSD needs to regain the 1.1720 area in order to trim losses.
Despite dollar strength, the cable turned positive on Monday following the retreat witnessed ahead of the weekend. The pair, however, struggles to overcome the 1.3700 barrier during the European hours, also staying below the 20-DMA, today at 1.3763. On the downside, the key immediate support arrives at 1.3650. If the pound manages to stay above this figure in the short term, more robust gains could be on the cards in the coming days. On the hourly timeframes, GBPUSD looks directionless as the prices are stuck between the key moving averages for the time being. It looks like the cable could spend some time in a consolidative mode in the short term before deciding on further direction. On the weekly charts, the upside potential remains limited as long as the prices stay below the 20-week SMA, today at 1.3867.
USDJPY has been rallying for the fourth day in a row today. The pair climbed to the 111.00 level for the first time since early-July and was last seen clinging to the upper end of the range. The prevalent risk-on mood during the European hours undermined the safe-haven Japanese yen, giving an additional boost to the USD/JPY pair. Also on the positive side, the daily RSI is pointing north but is yet to enter the overbought territory, suggesting there is room for further gains in the short term. In case of profit-taking, the initial support is now expected at 110.75, followed by the 110.55 area and the 110.20 figure. In a wider picture, the technical outlook looks upbeat as well, with the pair extending the bounce from the 20-week SMA, today at 110.05.
Gold prices climbed to the $1,760 area earlier on the day before retreating back into the negative territory to settle marginally below the $1,750 area in recent trading. The bullion failed to extend the early recovery as dollar demand continues to persist, capping the upside potential surrounding the USD-denominated commodity. On the upside, the $1,800 figure continues to represent the key barrier while the intermediate resistance arrives at $1,785 where the 20-DMA lies. If the downside pressure intensifies anytime soon, the XAUUSD pair would challenge last week’s lows around $1,737. In the immediate term, however, gold prices may stay afloat, with the $1,850 area staying in focus as long as the mentioned lows act as a support zone.
USDCHF surged to the 0.9290 region earlier in the day before trimming intraday gains. The pair corrected lower to the 0.9265 area, trading up 0.29% on the day. While the overall tone surrounding the pair looks bullish, the dollar may lack the upside momentum to turn the 0.9300 figure into support anytime soon. On the positive side, USDCHF has been staying above the ascending 20-DMA for nearly three weeks already. On the four-hour charts, the technical picture looks mixed, as the RSI is pointing lower while the prices stay above the key moving averages. On the downside, the immediate support arrives at 0.9240, followed by the 20-DMA, today at 0.9210. As long as the prices stay above this moving average, downside risks are limited.