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Forex majors – May 2018

May 04, 2018

The dollar is the protagonist again thanks to the combined effect of 10-year US yields at 3% and a less aggressive ECB pressing on the need to normalize the monetary policy in Europe.

Concerning the first point it will be interesting to see the market reaction to the FOMC this week. On the second point, the growth that is losing strength and the inflation that struggles to approach 2% are the reasons that support the prudence of Draghi. A bit of weakness is back on the Pound, Yen and Australian Dollar in the month of the  recovery of the greenback. Let's now see in detail the technical conditions of the main exchange rates.

EURUSD

 

eurusd040518.jpg

After a long period in a tight trading range (1.22 / 1.24), EurUsd has finally unlocked the technical situation by dropping below 1.22 and immediately heading towards 1.20. This level represents the first level of support to which the bears could aspire, also because here we can find the top of September 2017. Even using the Ichimoku technique we can see how this support area has the same importance that it had in October when EurUsd stationed for a little while above 1.15 before starting again. We will see if the behaviour will be similar, but in case of a failure of 1.20 there would be no big doubts about the next target that would be positioned around 1.17, transit zone of the 38.2% of the Fibonacci retracement.

USDJPY

After touching 105, UsdJpy has started pushing itself below the 200-day moving average currently in transit at 110. Graphically we should be facing a typical return move on the previous support levels. In fact, after the bearish break of 110 in January, there has been a fall and then the current rebound. Even if UsdJpy shows the willingness to rise further, it would find a further significant barrier in the downtrend line at 111.50 which combines the tops of 2017. A stretch over this resistance would completely change the scenario on UsdJpy ending the downward phase.

usdjpy040518.jpg

GBPUSD

An extremely disappointing growth rate has weakened the British pound. The Cable has thus fallen from 1.437 on April 17th to 1.37 on Friday, threatening now the uptrend trend line well accompanied by the 200-day moving average. Also, as we can see from the graph, we could witness a formalization of a double top at 1.43 whose consequences would be particularly serious for the Cable as it would interrupt the sequence of rising tops in 2017. Attention then to 1.365: considering the oversold reached till now we still consider the long Gbp side to be preferable.

 

gbpusd040518.jpg

AUDUSD

audusd040518.jpg

 

AudUsd has a similar structure to that of GbpUsd. A peak in January at 0.81 and then a vertical fall up to 0.75, curious behaviour at a time when raw materials were closer to the tops of January. Probably AudUsd could anticipate a slowdown of the economic cycle (and therefore the commodities), but also for the Australian Dollar there is a risk of a double top. A failure of 0.75 would confirm this scenario with target the low of February 2016.


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