After a recovery in January, the dollar index has lost ground in February

Februar 15, 2021 17:00

In January, the dollar index experienced a sharp rebound in its price after hitting its critical support level. This followed the weakness of the US dollar against its major rivals in 2020 which led to it trading below the 90.00 level at the beginning of this year.

This January rally was mainly due to increased volatility in the equity markets in the second half of the month, caused by further uncertainty surrounding the coronavirus pandemic and resulting in declines in virtually all the major indices except the Nasdaq.

This rally in the dollar index stalled in the vicinity of the 50% Fibonacci retracement level of the last downward impulse, reaching levels slightly above 51.50. However, so far this month, this situation has reversed again with a 0.22% retracement in search of its important support level. We will need to watch the evolution of this index in the coming sessions to see if it is able to maintain this important support level.

EURUSD Analysis

As mentioned above, due to volatility in the stock markets, many investors sought refuge in the US dollar last month, causing a bearish start of the year in the EURUSD. However, last week, this pair rose 0.59%, continuing the rebound after reaching an annual low of 1.19520.

This increase has caused the EURUSD to return to levels above 1.21200, therefore, preventing the pair from meeting the target of the triangle formation after breaking it downwards, which led to its annual low before making a pullback to the base of the triangle, which was not confirmed as the EUR continued to gain positions.

Over the next few days, we will be watching to see if this pair is able to maintain this new upward momentum, look for the 1.22 level again and form a new attack on the highs of the beginning of the year.

Source: Admiral Markets MetaTrader 5 - EURUSD Daily Chart. Date Range: 4 November 2019 - 15 February 2021. Date Captured: 15 February 2021. Past performance is not necessarily an indication of future performance.

Price evolution of the last five years:

  • 2020 = +8.93%
  • 2019 = -2.21%
  • 2018 = -4.47%
  • 2017 = +14.09%
  • 2016 = -3.21%

GBPUSD Analysis

In the case of the GBPUSD, we can see that this pair is following a very clear uptrend since the lows of March 2020, around the 1.14100 level, to above the 1.39 level, which has taken it above its long term downtrend line (in dotted red).

As we can see in the weekly chart, contrary to the EURUSD, this pair continued its uptrend in January, which is now bringing it closer to its important resistance level of 1.40. 

It is currently trading far from its main support levels and we can see a strong overbought level in the stochastic indicator, although its MACD indicator is still strong. In addition, we can see that, recently, there has been a bullish triple crossover in its moving averages, so we can expect it to continue its way until it faces its resistance level. Therefore, we need to be very attentive and see if the GBPUSD is able to overcome this resistance or make a bearish bounce towards its support levels.

Source: Admiral Markets MetaTrader 5 - GBPUSD Weekly Chart. Date Range: 31 August 2014 - 15 February 2021. Date Captured: 15 February 2021. Past performance is not necessarily an indication of future performance.

Price evolution of the last five years:

  • 2020 = +3.10%
  • 2019 = +3.95%
  • 2018 = -5.54%
  • 2017 = +9.43%
  • 2016 = -16.26%

USDJPY Analysis

Finally, in the USDJPY, we can observe how the Japanese yen has, once again, behaved as an important safe haven asset since the beginning of the pandemic. This is due to the fact that in times of crisis, Japanese investors tend to unwind their positions overseas in order to seek refuge in their own currency.

This behaviour has led the price to seek the lower band of the green and red sideways channel which currently acts as its main support level at around 104.00 yen per dollar. 

As we can see in the monthly chart below, the current trend is bearish after the crossover of moving averages and the failure in the last attempt to reach the upper band of the channel after facing its downtrend line. So it is important to look out for whether the price will be able to hold its support level or if it continues with declines to the next 50% Fibonacci retracement level at around 100 yen per dollar, or even lower levels, thus fulfilling the price target of the channel width.

Source: Admiral Markets MetaTrader 5 - USDJPY Monthly Chart. Date Range: 1 November 1993 - 15 February 2021. Date Captured: 15 February 2021. Past performance is not necessarily an indication of future performance.

Price evolution of the last five years:

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

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