US dollar regains ground against the main currencies

July 12, 2021 15:00

As we commented in our previous analysis of the Forex market, during the first quarter of the year the trend in the dollar index was positive, scoring 3.718%. However, during the months of April and May this suffered a setback with losses that reached 2.11% and 1.40% respectively against the main currencies, reaching quarterly lows at $89.50.

Since that time, the price began to recover and after registering a rise of 2.71% during the month of June, the dollar index finally managed to close the second quarter of the year with a slight decrease of 0.863%, which allowed it to finally close the first half with an appreciation of 2.822%.

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.

For its part, the European Central Bank has recently announced a historic change in relation to its inflation target, since as Christine Lagarde commented at its last meeting, the ECB is embarking on the project of incorporating the cost of owned housing into the price index, in turn making it more flexible, and removing the commitment to keep inflation around 2% in order to avoid taking decisions too early during the economic recovery.

EURUSD Analysis

If during the past year 2020 the trend was clearly bullish in the EURUSD, in the first half this has lost 2.93% against the dollar due to the recovery that the greenback is experiencing, as we have mentioned previously.

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 (green) ceiling which has caused the price to lose several support levels including the uptrend line and its 200-session moving average.

This bearish move has also caused a cross of bearish moving averages of its short and medium term averages (white and orange) and its short and long term averages (white and red) thus confirming the change from uptrend to bearish.

Currently, the price is making a possible pullback to its important resistance support zone in the green and red band, so we must be aware of the evolution of the price in this area, since a failure in the attempt to recover this level could generate a further fall to the annual lows around the 1.1713 level.

Source: Daily EURUSD chart of Admiral Markets' MetaTrader 5 platform from March 17, 2020 to July 12, 2021. Held on July 12 at 11:30 a.m. CEST. Please note that past returns do not guarantee future returns.

 

Evolution of the last 5 years:

  • 2020 = +8,93%
  • 2019 = -2.21%
  • 2018 = -4.47%
  • 2017 = +14.09%
  • 2016 = -3.21%

 

GBPUSD analysis

In the case of GBPUSD, we can see that during the first half of the year it has risen by 1.12%, thus continuing the upward trend since it marked lows on March 20, 2020 around the level of 1.14100 to almost reach the level of 1.42400, which has led it to exceed its long-term downtrend line (in the red). Despite this, we can see that during the month of June the pound sterling lost 2.69% against the dollar due to the strength of the greenback.

As we can see in the weekly chart, after marking highs last February, the price as in the EURUSD has made a double-deck formation in the annual highs that has led it to lose the important level of 1.40 in search of its average of 18 weeks where it has found an important point of support.

The definitive loss of this support level could cause a further fall in search of its next support level in the red band that previously acted as resistance at the level close to $1.35. Conversely, if the price manages to maintain and bounce off its short-term average, the price could find new momentum in search of its annual highs.

Source: Weekly chart of GBPUSD on Admiral Markets' MetaTrader 5 platform from November 23, 2014 to July 12, 2021. Held on July 12 at 12:05 pm CEST. Please note that past returns do not guarantee future returns.

 

Evolution of the last 5 years:

  • 2020 = +3.10%
  • 2019 = +3.95%
  • 2018 = -5.54%
  • 2017 = +9.43%
  • 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, where it went from trading at levels close to 102,700 to trading at levels close to 111,000.

After setting annual highs in early April, USDJPY experienced a pullback in search of its 18-session average and after repeatedly leaning on this price until it reached this resistance level again in the green band.

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. On the contrary, in its stochastic indicator we can observe a cumulative overbought and a bearish divergence so we cannot rule out some kind of correction in the price.

Source: Weekly chart of USDJPY on Admiral Markets' MetaTrader 5 platform from November 23, 2014 to July 12, 2021. Held on July 12 at 12:30 p.m. CEST. Please note that past returns do not guarantee future returns.

 

Evolution of the last 5 years:

  • 2020 = -4.95%
  • 2019 = -0.88%
  • 2018 = -2.76%
  • 2017 = -3.59%
  • 2016 = -2.85%

 

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