The euro could stage a bullish bounce later in the week if the ECB delivers a hawkish tone on Thursday
The dollar has steadied after yesterday’s rally fueled by rising US inflation. The USD index advanced to fresh May 2020 highs around 100.52 earlier on Wednesday before correcting slightly lower as traders took some profit at long-term peaks. Now, should the 100.56 mark give up, the buck will advance to April 2020 highs within its strong bullish trend. As such, EURUSD plunged to the 1.0810 area before bouncing back to the flat-line in early European deals. Now that the common currency failed to hold above the 1.0830 zone, downside risks have intensified, with two-year lows around 1.0800 back in the market focus. However, the euro could stage a bullish bounce later in the week if the ECB delivers a hawkish tone on Thursday. The EURUSD pair was last seen changing hands around 1.0825, unchanged on the day while the USD index has settled in the 100.39 zone, up 0.1% on the day.
Another failure to hold above the 1.3000 mark sent the GBPUSD pair to fresh November 2020 lows around 1.2970 on Wednesday. Following the latest sell-off, the cable bounced slightly to settle around the flat-line in recent trading. However, as the dollar stays elevated across the market, the pound is unlikely to stage a solid recovery in the near term, with downside risks persisting, especially as the priced derailed the 1.3000 psychological level for the first time since late-2020. On the four-hour timeframes, GBPUSD stays depressed while below the descending 20-SMA while the RSI is pointing slightly lower in neutral territory, suggesting there is room for deeper losses in the near term. Should the pressure continue to build up further, the pound may threaten the 1.2900 figure in the coming days of weeks. Adding to a more downbeat technical picture, the pair is trading well below the key moving averages on the weekly charts.
USDJPY exceeded the 126.00 figure for the first time in twenty years on Wednesday, extending the unprecedented rally amid a strong devaluation in the Japanese yen. The pair advanced to 126.30 for the first time since mid-2005 and was last seen clinging to the upper end of the extended trading range, suggesting the rally could continue in the near term despite the overbought conditions. On the hourly timeframes, however, there are some signs of a waning upside momentum, with the RSI turning flat around the 70 figure while the buying pressure is easing, which implies that the dollar could correct below 126.00 in the immediate term. On the downside, the key immediate support now arrives at 125.30, followed by the 124.00 figure. Should the rally continue in the coming days, however, USDJPY may target the 126.85 zone next.
Gold prices have been trending north for the sixth day in a row on Wednesday, retaining a bullish bias despite USD strength. The XAUUSD pair advanced to one-month highs just below the $1,980 zone that represents the key barrier on the way towards the $2,000 psychological level. On the positive side, the bullion has settled well above the ley daily moving averages while the RSI keeps pointing north but is yet to enter the overbought territory, suggesting the precious metal could finally regain $2,000 even as the greenback stays elevated at two-year tops. In a wider picture, the XAUUSD pair has been rising for the second week in a row, targeting now the $1,990 zone that could cap gains should the metal lack the bullish momentum in the coming days. On the downside, the nearest support now arrives at $1,950, followed by the 20-DMA, today at $1,938.