The USD index bounces off more than three-week lows, bearish risks limited
The dollar has been struggling for the third day in a row. The USD index extended losses to more than three-week lows, slipping to the 105.50 zone earlier in the day before trimming intraday losses. A less hawkish tone by the Fed earlier in the week triggered a broad-based sell-off in the greenback, but the pressure could ease soon as traders have almost digested the central bank’s message. In other words, the downside potential looks limited so far despite the ongoing correction from multi-year highs seen earlier this month seen above 109.00. As such, EURUSD retreated from the 1.0250 region, refraining from a more decisive bounce during the European hours on Friday. The currency would finish higher the second week in a row should the prices manage to hold above the 1.0200 figure on a daily closing basis.
Extending the ascent, the pair advanced to one-month highs around 1.2245 early on Friday before reversing intraday gains in recent trading as the dollar proceeded to recovery across the market. The pair has slipped to the 1.2160 zone, trading slightly lower on the day. As such, the cable is yet to confirm a break above the 1.2200 figure as the greenback resists the downside pressure. On the positive side, the pound holds above the 20-DMA, today at 1.1993 while the daily RSI turned directionless, which implies that the pair could at least see a limited slide in the immediate term, barring renewed risk aversion across the markets. On the weekly timeframes, the prices extended the bounce from long-term lows seen this month around 1.1760. GBPUSD is finishing the second consecutive week with solid gains, with the RSI pointing north, extending its rebound from oversold territory.
Earlier in the week, the USDJPY pair dropped below the 20-DMA, extending the retreat on Friday. The dollar slipped to mid-June lows around 132.50 that acted as support and triggered a mild bounce in recent trading. Still, the path of least resistance remains to the downside in the immediate term, especially as the prices have settled back below the mentioned moving average, today at 136.70. Also, USDJPY now needs to regain the 135.00 mark in order to shrug off some of the selling pressure. A failure to hold above 133.00 on a daily and weekly closing basis could send the greenback to the key support around 131.50. On the shorter-term timeframes, the bearish bias remains solid but it’s still too early to bet on more substantial losses in the near term, with the 137.00 figure remaining in the market focus at this stage. In a wider picture, the prices are holding just marginally below 24-year highs registered around 139.40 earlier in the month.
Gold prices extended the rally for the third day in a row on Friday. The precious metal derived solid support from dollar’s broad-based weakness triggered by a less hawkish tone by the Federal reserve this week. The XAUUSD pair exceeded the descending 20-DMA earlier in the week to more than three-week highs just below the $1,770 zone that now represents the immediate bullish target, followed by the $1,800 psychological level last seen on July 5 when gold saw a steep decline amid the rallying dollar. The yellow metal added more than 2% since Monday, finishing the second bullish week in a row. However, as the prices started July slightly above $1,800, gold is set to close the month in negative territory, shedding nearly 2.4%. A failure to regain the psychological level in the near term could trigger a retreat.