Conditions were all aligned on Friday until a drop in Treasury yields finally proved to be the turning point for a potential technical breakout in the greenback. 10-year Treasury yields hit a high of 3.92% in Europe but ended the day down more than 4 basis points at 3.82% and that’s what drove the dollar lower.
The US currency came close to posting several key technical breakouts, but they all failed. A case close but no cigar. I let the graphics do the talking:
USD/JPY was buoyant in European trading on Friday, knocking on the door of the 135.00 handle. However, the daily close failed to breach the key level and also fell below the late December and January highs around 134.50-77, which continues to at least keep the sellers interested.
That said, the pair still retains the momentum from its recent rally and the semblance of head and shoulders reversed model highlighted here is still intact. So that will be a consideration for trading this week.
GBP/USD appeared to continue falling below 1.2000 at the end of last week, but support from its 200-day moving average (blue line) proved sufficient for a reversal. The reversal in price action was of course aided by the falling dollar amid falling bond yields.
But for now, the confluence of the 100 (red line) and 200 day moving averages will act as key support levels for trading this week.
USD/CAD nearly breached its 100-day moving average (red line), but was eventually thwarted, with the January 19 high at 1.3520 also providing additional daily resistance. As such, these will continue to be key levels to watch for any potential bullish pushes that may follow later in the week.
AUD/USD appeared to be bound for a major test of key technical support after a supposed break below the January 19th low at 0.6870. However, Friday night’s reversal in momentum saw the Dollar’s gains evaporate and the level held – at least on the daily chart – with buyers also holding firm after a close push towards the 200 moving average. days (blue line).
NZD/USD was in a somewhat similar position as it ran into support from its January lows at 0.6190-00 before the tide turned against the dollar. The pair was also close to a test of its own 200-day moving average (blue line), but the sellers ran out of steam amid the USD reversal.
As such, the lows shown above as well as the confluence of the major daily moving averages will continue to act as key support levels to watch to limit bearish momentum going forward.
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