Dollar Index: Bullish divergence ahead of next week’s ECB

Omkar Godbole FXStreet Contributor

The US dollar began this week on a sour note. The greenback was offered across the board after North Korea fired missile over Japan. The resulting jitters in the financial markets saw investors run for the fox hole, i.e. safe havens like US treasuries, gold and lower yielding currencies like the Japanese Yen.

The Dollar Index [DXY] clocked a weekly low of 91.62 before turning higher to 93.35 levels. The index fell to a low of 92.10 after the US wage growth numbers missed estimates. Despite the allround weak numbers, the weekly low of 91.62 was not challenged. In fact, the index currently trades on a positive note around 92.85 levels.

Extended weekend plays spoil sport: Dollar’s resilience could also be due to the fact that US desks are heading for an extended weekend. Markets are closed on Monday on account of the Labour Day holiday.

The ECB works hard to keep the EUR/USD below 1.20: The currency pair jumped to a high of 1.1980 following the release of dismal US data, only to fall back to 1.1850 on ECB’s jawboning. The central bank is expected to shoot down QE taper speculation next week. The jawboning seen today is likely to keep the buyers at bay ahead of the next week’s ECB decision.

Technicals - Bullish RSI divergence

Daily Chart

The bullish price RSI divergence on the daily chart suggests the sell-off from the January high of 103.82 has run out of steam.
However, the outlook would turn bullish only after the descending trend line from the April 10 high and May 11 high has been breached, in which case the resistance at 96.32 [June 14 low] could be put to test.
On the downside, only an end of the day close below 91.62 would revive the big sell-off and could yield sub-90 levels.

FX snapshot

EUR/USD: Bearish RSI divergence on the daily chart. Failure to hold above 1.1910 [Aug 2 high] could yield a drop to strong support around 1.1730. On the higher side, 1.20 is big resistance.

GBP/USD: An end of the day close above 1.2967 [50-DMA] would kill the odds of the pair forming a head and shoulders pattern on the daily chart.

USD/JPY: Bullish MACD divergence on the daily chart, still needs to break above 110.95 [Aug 16 high] to entice the bulls.

AUD/USD: Trend line sloping higher from June 2 low and July 7 low remains intact. A break above 0.80 could open doors for violation at the July high of 0.8066.

NZD/USD: Rejection at head and shoulders neckline 0.7204 reinforces bearish outlook. Sell-off could gather pace below the 200-DMA support of 0.7132.

USD/CAD: Yesterday’s bearish outside day candle and a negative action today confirms the corrective rally is over. The pair clocked a low of 1.2340 today and looks set to peep below the monthly 50-MA level of 1.2318. The daily and monthly RSI sow plenty scope for fall, while the weekly RSI is close to being oversold.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD stays defensive below 1.1900 as USD recovers

EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.

GBP/USD holds above 1.3600 after UK data dump

\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.

Gold sticks to modest intraday losses as reduced March Fed rate cut bets underpin USD

Gold languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.

Cardano eyes short-term rebound as derivatives sentiment improves

Cardano (ADA) is trading at $0.257 at the time of writing on Thursday, after slipping more than 4% so far this week. Derivatives sentiment improves as ADA’s funding rates turn positive alongside rising long bets among traders.

A tale of two labour markets: Headline strength masks underlying weakness

Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.