The technical sentiment confirmed long-term trends for many assets in the financial markets this past week. Several breakthroughs were noticed, especially in dollar-nominated instruments. The greenback was the strongest currency in the foreign exchange markets, while equities investors were focused on US stock indices. Major benchmarks printed all-time highs this past week with the only exception of Dow Jones Industrial Average index, which remained unchanged this week. S&P 500 added 1.08% to its rate, closing the trading week at the highest level ever. NASDAQ had a more rapid bullish rally, surging 1.58% and finishing the trading week above 7800 points, the highest price on the record. European indices were trading with a mixed bias. German DAX 30 gained 0.76%, while French CAC 40 lost 0.20% of its value. Japanese Nikkei 225 benchmark was trying to follow US equities, but the growth pace was much slower (+0.26%).
Such a considerable difference caused the US dollar’s strength across the board. The world’s reserve currency gained strength versus all of its peers including majors and exotics. The US dollar index soared 0.69%, closing the trading week at the highest levels since May 2017. The single European currency, which has almost 60% in the volume-weighted basket of six major currencies, lost 0.87% versus the greenback, charting the lowest weekly close rate in two years. The British Pound was also weak, but GBP/USD was supported at the level of 1.2900, and the pair lost only 0.60% of the exchange rate. USD/CHF was trying the water above 1.0200 for the first time since December 2016 and finished the week just a couple of pips below that mark. All of the commodity currencies were weak with AUD/USD leading the losses of -1.52%. NZD/USD dipped just 0.40%, recovering the most of mid-weeks losses on Friday; USD/CAD tested resistance above 1.3520 but slid towards 1.3450 support at the end of the trading week.
WTI Crude oil price ended the trading week in the red for the first time in 8 weeks after a failed test of resistance above $66.50 per barrel. There was also a notable divergence in safe-haven assets. Gold price gained strength, while US 10-year Treasury yields declined. Japanese yen’s price action was unusual as traditional risk-appetite index did not reflect bullish rally in US equities. Emerging markets currencies were mixed: USD/MXN charted an upside whipsaw but added 0.94%, while USD/ZAR rallied 2.25%, printing the highest gain of the greenback among exotic pairs.
The single European currency renewed year-to-date lows this past week and charted the lowest weekly and daily close rate since May 2017. The recent bottom of 1.1194 was breached on Wednesday last week as EUR/USD lost more than 0.65% in one single day. The bearish action began on April 18 when the bulls failed to break through the 55-days simple moving average after the bullish retracement in the first half of April. Slow MACD trend indicator excluded the probability of a bullish divergence as its lines charted lower lows recently. Fast RSI oscillator confirmed the bearish sentiment last Monday when the 50% level limited the bullish bounce-by-trend. Since then, RSI was edging lower, underlining the strong bearish momentum. The oscillator is approaching the level of 30%, but remains rather far from extremely oversold levels, leaving the room to go further south. We used to show long-term targets for the pair with the nearest support of 1.0980, and the price action puts that defensive barrier under the danger of nearing test in 2-3 weeks period. Bullish bounced are still possible, and the resistance level of 1.1200 looks attractive for new short positions, in case if the market would give such a high rate. Otherwise, the sell-and-hold trading strategy is applicable as EUR/USD has an extremely negative technical outlook in the medium-term perspective.
Although the British Pound was pressured by the greenback’s strength last week, the declining pace was comparatively slower, and the bottom of 1.2900 worked as the support level as Sterling traders bought the currency last Thursday. The technical sentiment remains bearish on the long run, however, GBP/USD could print a surprise this week. A deep bullish retracement (it’s too early to talk about a reversal though) is possible due to several technical factors on the daily chart below. First, 34-days Bollinger Bands indicators point to higher volatility with its lines spread, while the pair failed to reach the bottom line, leading to a potential bounce North. Daily close prices were above the lower edge on Wednesday and Thursday, while the Doji candle underlined heavy-volume demand for the pair. Fast Williams %R oscillator bounced off extremely oversold levels but remained in the negative territory. However, the direction of the Williams curve shows that the bulls are getting ready to recover at least some of the previous losses. Conservative trading strategy suggests new entries not earlier than 1.3064 resistance, while the middle BB line has to be monitored closely. If the bulls were able to breach it, GBP/USD might chart the first signs of a bullish reversal. Until then, downside pressure should persist.
The New Zealand dollar had tested 0.6600 for the second time this year. Both attempts were unsuccessful for the bears though, and NZD/USD bounced back to 0.6670 resistance after a two-day bullish retracement. Such a volatile price action caused a mixed technical sentiment. On the one hand, NZD/USD remains well below the 34-days exponential moving average since the breakout on March 27, while the ADX and DI indicator point to further bearish action. However, the Parabolic SAR indicator’s dots jumped below the price on the daily timeframe, which might point to a bullish reversal in the medium-term perspective. We’d take the wait-and-see position on the pair as going long would be too aggressive. The crucial resistance range is placed at 0.6700/38, where the momentum has to be assessed before determining future trading positions. However, if the bears renewed selling pressure on the pair right on the market open this week, chances for the lower-lows sequence would go higher, and we’d go short on NZD/USD hoping for a bearish breakthrough of the horizontal static support at 0.6600.
AUD/JPY was the weakest pair among cross-rates this past week as both AUD/USD and USD/JPY were moving in the same direction. Intraday technical sentiment had changed dramatically after the pair entered the Ichimoku Cloud last Monday. Several technical support levels were cleared during unilateral price action, and AUD/JPY tested the local bottom printed on March 28. The Ichimoku Cloud trend indicator turned bearish with a wide range of the span on the negative side after the bearish cross happened. The only positive sign for the bulls was that the pair finished the trading week above the Ichimoku’s Conversion Line resistance. That might lead to a possible test of the second resistance curve - Ichimoku Base Line - which comes around 79.00 yen per A$. Technically, that resistance should be considered as attractive depth for the sell-highs trading strategy.
Despite the bullish rally, and a test of the ascending resistance trendline last week, USD/MXN remained in the long-term downtrend. The daily chart below has a descending triangle with the baseline at 18.7519, the level which has already been tested three times this year. The bullish retracement started on Monday, and the bears stepped in with heavy-volume sell entries at 19.1960 high charted on Thursday. The only thing that remained from that retracement was just a long whipsaw on the daily chart. We suggest that USD/MXN should extend losses this week with rather high chances to breach the horizontal static support line. If that happened, the pair might lose the ground, falling sharply.