Despite the extremely overbought conditions, the buck seems to be ready for a bullish continuation in the near term
The US dollar came off fresh cyclical highs registered just above the 101.00 figure earlier in the day as traders opted to take some profit around the levels last seen in March 2020. The USD index briefly exceeded the 101.00 mark before retreating towards 100.75 during the European hours. Still, the overall tone surrounding the buck remains upbeat, and the buying pressure could reemerge after some short-lived consolidation. EURUSD fell to the area of two-year lows before bouncing back to the 1.0800 mark in recent trading. It looks like the common currency could take a pause before another sell-off that would push the prices to fresh long-term lows. On the upside, the euro needs to make a decisive break above the 1.0820-1.0830 zone in order to shrug off some bearishness in the immediate term. A more significant target for the European currency arrives at 1.0930 where the descending 20-DMA lies. As long as the pair stays below this moving average, the upside potential remains limited at this stage.
GBPUSD has been pressured since another failed attempts to regain the descending 20-DMA last week. The pair finished lower on Monday, trying to regain some upside momentum during the European trading hours on Tuesday, as the buck came off fresh long-term leaks slightly. The cable bounced back above the 1.3000 figure and was last seen changing hands around 1.3035, up 0.22% on the day. The prices now need to hold above 1.3000 in order to make more decisive and robust recovery attempts in the near term. However, the path of least resistance remains to the downside as long as the pound holds below the 1.3300 mark last seen nearly one month ago. Another break below 1.3000 could send GBPUSD to fresh November 2020 lows around 1.2850. The immediate support now arrives at 1.2970, followed by the 1.2930 zone. On the hourly charts, the cable is now stuck between the key moving averages, suggesting the upside potential remains limited for the time being.
USDJPY jumped to fresh twenty-year highs above 128.00 on Tuesday. The pair extended the ascent to 128.45 and was last seen clinging to the upper end of the extended trading range. Despite the extremely overbought conditions, the dollar seems to be ready for a bullish continuation in the near term, with the 130.00 handle coming into the market focus. On the other hand, it looks like the buck needs to make a pause, as the pair has been rallying for the thirteenth session in a row already. Should USDJPY proceed to a bearish correction amid the potential profit-taking, the 127.55 zone will act as the immediate support, followed by the 127.00 mark. In a wider picture, a significant support zone is represented by the ascending 20-DMA, today at 124.00. Of note, there are some signs of a waning bullish momentum on the shorter-term timeframes, suggesting the pair could stay below 129.00 at this stage as profit-taking could push the dollar down from the mentioned peaks.
USDCHF exceeded mid-March peaks around 0.9460 to refresh more than one-year highs on Tuesday. The pair extended the rally to 0.9466, now targeting the last year’s peak at 0.9472. Should this level give up anytime soon, the greenback may challenge 0.9500 for the first time since June 2020. Of note, the daily RSI is yet to enter the overbought territory, suggesting there is room for further gains in the near term. On the four-hour charts, USDCHF looks resilient while holding well above the ascending 20-SMA, currently at 0.9430. Should the dollar refrain from challenging 0.9470 zone, some short-term downside correction could be expected. On the downside, the immediate support now arrives at 0.9430, followed by 0.9400. In a wider picture, the uptrend remains intact as long as the prices stay above the 200-DMA, today at 0.9220.