US inflation doubts continue to affect the dollar
During the first quarter of the year the trend in the dollar index was positive, but the months of April and May saw it lose 2.11% and 1.40% respectively against the main currencies, reaching quarterly lows at $89.50, starting a lateral movement between these lows and $90.57 in the vicinity of its average of 40 sessions.
Attention in the foreign exchange market remains focused on possible measures and changes that the Federal Reserve may undertake to deal with rising inflation in the United States. This was brought about by the economic recovery and consumption growth, thanks to the advanced vaccination process, as a change in policies and an eventual rise in interest rates could boost the dollar.
At the moment, the month of June is reaching its equator with a rise of 0.51% in the dollar index.
EURUSD Analysis
If at the beginning of the month the market was watching for the unemployment data, last week, the focus was on inflation in the United States. This data was published last Thursday, and we could see that it soared to 5% year-on-year, exceeding market expectations, setting the core CPI at 3.8%.
Technically speaking, if we look at the weekly chart, it seems that EURUSD has slowed at the level of 1.2240, forming a double a double ceiling (green) that has caused the price to lose in the final stretch of last week its averages of 18 and 40 sessions. Consequently, this confirms the break of the bullish channel that it has been following over the past few weeks.
Moreover, the loss of these levels can cause a further correction in search of your long-term trend line and your average of 200 sessions.
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 this pair is following a very clear 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 red).
As we can see in the weekly chart, after marking highs last February, EURUSD price began a correction that led it to lose the important level of 1.40 in search of its average of 18 sessions where it has found an important point of support to start a new momentum. This has led it to exceed not only the level of 1.40 but to form a double roof in the area of annual highs (in green).
This double-ceiling formation can, in turn, cause a price correction in search of your average of 18 sessions that currently acts as your first support level. As long as the price does not lose its average of 18 the feeling will remain upward. The definitive loss of 1.40 and the average of 18 would open the door to further correction to the previous support/resistance level in the red.
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 from the rises in the dollar, since during the rises in February and March it went from trading at levels close to 102,700 to trading at levels close to 111,000. As we can see from the weekly chart, after facing its important support level for a long time (represented by the red band), the price definitely bounced to above the average of 200 in the red and the long-term downtrend line.
But as we have mentioned before, since April the dollar has again given ground against its competitors, so the pair retreated to its average of 18 weeks where it found a point of support to continue with the rises.
Technically speaking, we will have to be very attentive to the evolution of the quote in the coming weeks, because if the price manages to recover the level of 110,000 it could find a new upward momentum in search of the annual highs. Breaking these highs could open a bullish rally in search of the upper side channel band in green. On the contrary, if the price re-enters lower levels, we could get a greater correction.
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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