July-05, 2022, Daily latest currency trading analysis and forex market forecast, by forex forum.
The USD/CHF advances sharply for the third straight day, snapping two days of consecutive losses that dragged the major to print a fresh two-month low of around 0.9495, gaining almost 1% on Tuesday. At the time of writing, the USD/CHF is trading at 0.9687.
On Tuesday, the USD/CHF opened near Monday highs. Nevertheless, it dipped as the London session opened, towards the daily pivot point around 0.9590, to never look back, overcoming on its way up some resistance levels, like the R1 pivot point at 0.9630, the July 1 high at 0.9641, before settling around just shy of the 0.9700 figure.
USD/CHF Daily chart
The USD/CHF daily chart illustrates the pair as upward biased; however, the double top remains in play. If the greenback extends its gains throughout the week and if USD/CHF buyers step in, a break above the 50-day moving average (DMA) at 0.9733 is on the cards and could accelerate a rally towards the 0.9900 mark. However, on its way north, USD/CHF buyers will need to reclaim April 2020 high at around 0.9802.
GBP/USD
GBP/USD outside-weekly reversal now testing key support- risk for price inflection
Weekly resistance, 1.2166, 1.2261, 1.2481– Support 1.1950–1.2021 (Key), 1.1650, 1.16
The British Pound plunged more than 1% against the US Dollar into the start of the week with GBP/USD on the defensive on the heels of an outside-weekly reversal last week. The decline takes Cable into a critical support pivot we’ve been tracking for months and the focus is on possible inflection in the days ahead. These are the updated targets and invalidation levels that matter on the GBP/USD weekly chart heading into July.
A pivot below threatens significant losses for the Pound with such a scenario exposing the 2020 close low at 1.1650, the 1.16-handle and yearly channel support around 1.1450s- both levels of interest for possible downside exhaustion IF reached. Initial weekly resistance now eyed at the May 2020 low-week reversal close at 1.2166 backed closely by the May low-week close at 1.2261. Ultimately, a rally / close above the 23.6% Fibonacci retracement of the 2021 decline / late-May weekly reversal-close at 1.2480/85 would be needed to invalidate the broader downtrend.
US Dollar
The US Dollar is starting Q3 the way that it’s traded for most of the first-half of the year, showing strength as both fundamentals and techs continue to favor the USD. The currency now sits at a fresh 19-year-high, coming very close to the Fibonacci level at 106.61. As I had looked at on the final day of Q2, EUR/USD was going to be a big driver behind the US Dollar this quarter as the Euro had continued to push down for support tests at the 1.0340 area, giving appearance of breakdown potential that’s already come to fruition just a couple days into Q3 trade.
US DOLLAR SHORTER-TERM
I looked into this theme last Tuesday, highlighting a key support test in the USD as last quarter was winding down. That support at 103.82 was a prior high from 2017 and last week, this served as a launching pad for that move of USD strength.
At this point, the challenge on the long side is trying to avoid chasing the move. And given that this high watermark in the USD comes along with a low watermark in EUR/USD, there could be a propensity for traders to try to fade on or both moves.
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EUR/USD
On the other hand, The EUR/USD broke below the 2017 low during the overnight session.
This is a bear breakout of the past two months. Bears want a successful bear breakout and measured move down from the June 27th high to the June 15th bear flag low (1.0103). Next, the bears want a measured move down off the two-month range, which would project to under 1.0000.
The odds are the current bear breakout below the two-month range will be a final flag, and bulls will buy soon. Bears need the current bar to close near its low, and they will also need follow-through tomorrow. More likely, today will close with a tail below the bar, which would be disappointing for the bears.
USD/JPY
The USD/JPY is almost unchanged in a trading session dominated by risk aversion, triggering flows toward safe-haven assets, and in the FX space, the USD, the JPY, and the CHF are the winners. Nevertheless, due to its risk-off nature, the USD/JPY is barely up 0.07%, trading around the 135.70s area.
Recession and high inflation worries are the headlines of the session. That said, European and US equities tumbled while safe-haven flows dominated the session, with the US Dollar Index, which pairs the greenback vs. six currencies, gaining 1.50%, sitting at 106.716. in the meantime, the USD/JPY seesawed in the 135.50–136.40 area during the day, within familiar ranges.
On the downside, the USD/JPY was capped by the strength of the greenback, but on the upside, falling US Treasury yields, mainly the US 10-year Treasury yields, are nose-diving thirteen basis points, sitting at 2.794%, well below the 3.50% YTD high.
USD/CAD
USD/CAD is at the highs of the day, up 175 pips to 1.3034.
That puts the pair within striking distance of the closing high for the year, which was at 1.3037 and set on June 17. That day they pair also set the intraday high at 1.3079.
Technically, the double top at 1.3079 was negative for the pair but the lack of follow-through to the downside in the past three weeks along with the big jump today suggests further upside — something I’ve been calling for.
A pop of the upside and continued slump in energy/commodities could lift the pair to 1.36/1.37 in the next few months. The measured target of the broken double top would be 1.36.
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