The dollar index continues to rise during the summer

August 23, 2021 15:30

As we commented in our previous analysis of the Forex market, during the first half of the year, the trend in the dollar index was positive, scoring 2.822% and at the moment it seems that this strength is being maintained during the summer months, since since the beginning of last June, the dollar index is experiencing a strong upward trend that has taken it from its support around $90 to an area close to $93.70, thus surpassing the previous annual high at $93.43.

Attention in the foreign exchange market remains focused on possible measures and changes that the Federal Reserve may undertake in the coming months to deal with rising inflation in the United States brought about by the economic recovery and consumption growth thanks to the advanced vaccination process, since a change in policies and an eventual rise in interest rates could boost the dollar.

EURUSD Analysis

After a positive year 2020, the year 2021 is leaving a bitter taste in the EURUSD after during the first half of this lost 2.93% against the dollar due to the recovery that the greenback is experiencing as we have mentioned previously.

So far this summer, the trend remains negative and at the moment shows no signs of recovery in the short term, because if as expected finally the Federal Reserve begins to take measures such as raising interest rates or reducing its asset purchase program thus reducing liquidity,  the dollar can continue to be one of the main beneficiaries thus increasing the downtrend in this pair.

Technically speaking, if we look at the daily chart we can see that EURUSD slowed at the 1.2240 level forming a double a double ceiling (green) which has caused the price to lose several support levels including the uptrend line, the support and resistance zone represented by the orange band and its 200-session moving average.

This bearish move has also caused the so-called death crossover by making a triple bearish crossover of its short, medium and long term moving averages (white, orange and red) thus confirming the change from uptrend to bearish.

Despite the accumulated oversold that we can observe in its stochastic indicator, it seems that the price could head to its next support level represented by the lower red band.

This is an important point and we will have to see if the price is able to maintain this important level and make a upward rebound in search of its 18-session moving average (white) or even its important resistance support zone in the orange band. Therefore, we must be aware of the evolution of the price in this area, since a failure in this possible rebound or the loss of this important level of support, would open the doors to a further correction to levels close to $1.14 per euro.

Source: Daily EURUSD chart of Admiral Markets MetaTrader 5 platform from April 22, 2020 to August 23, 2021. Held on August 23 at 12:00 pm CEST. Please note that past returns do not guarantee future returns.

 

Evolution of the last 5 years:

  1. 2020 = 8.93%
  2. 2019 = -2.21%
  3. 2018 = -4.47%
  4. 2017 = 14.09%
  5. 2016 = -3.21%

 

GBPUSD analysis

In the case of GBPUSD, we can see that although during the first half of the year it has risen by 1.12%, since it marked annual highs at the end of last May, it is experiencing a strong decline that has led it to fall from an area above $1.42 dollars to a level close to $1.36.

As we can see on the weekly chart, the price has faced several times its important level of resistance represented by the green band that joins the highs of 2018 and this year 2021 but has not been able to overcome this level.

After its last failed attempt, the price has made a strong correction that has led it to make a bearish cross of its short and medium-term moving averages respectively in search of its resistance support level in the orange band.

If the price finally reaches this level, we will have to be very attentive to the behavior, since the bearish breakout of this level would open the door to a possible change of trend from upside to bearish pending confirmation of the confrontation between the price and its 200-week moving average in the red that acts as the main support. The loss of this moving average would open the door to a further correction in search of $1.30 per pound.

Source: Weekly chart of GBPUSD on Admiral Markets MetaTrader 5 platform from January 11, 2015 to August 23, 2021. Held on August 23 at 12:10 p.m. CEST. Please note that past returns do not guarantee future returns.

 

Evolution of the last 5 years:

  1. 2020 = 3.10%
  2. 2019 = 3.95%
  3. 2018 = -5.54%
  4. 2017 = 9.43%
  5. 2016 = -16.26%

 

USDJPY Analysis

Finally, if we look at USDJPY, we can see how the Japanese Yen was one of the big losers with the rises of the dollar since during the first half of the year this has lost 7.61% against the dollar thanks to the strong rises in February and March since it went from trading at levels close to 102,700 to trading at levels close to 111,000.

During this summer, we can observe a fairly lateral movement in the price action between its resistance level represented by the green band and its average of 18 weeks in blank possibly due to the accumulated overbought and the negative divergence that we could find in the past in its stochastic indicator.

Technically speaking, we will have to be very attentive to the evolution of the quote in the coming weeks, since if the price manages to overcome this level of resistance, we could find a bullish rally in search of the upper band of the side channel in green. Conversely, the downside breakout of its 18-session moving average could show strength in the Yen which could seek its next support level in the coincident zone of its 40- and 200-week averages in orange and red respectively.

Source: Weekly chart of USDJPY on Admiral Markets' MetaTrader 5 platform from January 11, 2015 to August 23, 2021. Held on August 23 at 12:25 p.m. CEST. Please note that past returns do not guarantee future returns.

 

Evolution of the last 5 years:

  1. 2020 = -4.95%
  2. 2019 = -0.88%
  3. 2018 = -2.76%
  4. 2017 = -3.59%
  5. 2016 = -2.85%

 

Did you know that you can use the Trading Central Technical Ideas Lookup indicator to find actionable trading ideas on thousands of different markets?

Start your free download by clicking on the banner below:

INFORMATION ABOUT ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst, Roberto Rojas (analyst), (hereinafter “Author”) based on their personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
Avatar-Admirals
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.