Mid-Week Technical Outlook: G10 Currencies

A wave of risk aversion whacked financial markets on Wednesday after President Vladimir Putin declared a partial mobilization over Ukraine and accused the West of ‘nuclear blackmail’.

This negative development hit stocks as investors rushed to safe-haven destinations like the dollar, gold, and government bonds. With tensions likely to escalate between Russia and Ukraine following the latest news, risk-off may remain the name of the game ahead of the Federal Reserve rate decision this evening.

We have a couple of potential trading opportunities on our radar that could be triggered by not only the Fed but BoE and key economic reports this week. Our focus will fall on G10 currencies and our tool of choice will be none other than technical analysis.

DXY gearing for a breakout?

Heightened geopolitical tensions injected dollar bulls with fresh inspiration this morning. A hawkish Federal Reserve could feed the beast, pushing the Dollar Index (DXY) beyond 110.78 before the end of today! Such a development could encourage a further incline towards 111.00 and 112.50, respectively. A move back below 109.14 may result in a selloff back to 107.75.

EURUSD slams into 0.9900

Bears are knocking on 0.9900’s door and may force their way through this support if the dollar continues to appreciate. The EURUSD is under a lot of pressure with bears enjoying the ride downhill. A solid breakdown below 0.9900 could encourage a selloff towards 0.9700.

GBPUSD builds downside momentum

The BoE decision ON Thursday will heavily influence the GBPUSD near-term outlook. A hawkish central bank that moves ahead with a jumbo rate hike could throw pound bulls a lifeline. However, upside gains are likely to be capped by growth fears. Prices have the potential to sink lower if a daily close below 1.1350 is secured.

USDJPY trapped within range

Over the past few days, the USDJPY has been trapped within a 300-pip range with support at 142.00 and resistance at 145.00. The trend is bullish with prices trading above the 50, 100, and 200 SMA. A solid breakout above 145.00 could inspire a move towards 146.00 and higher. If prices sink back towards 142.00, we can see the USDJPY challenge at 139.50.

AUDUSD breaks below 0.6700

A stronger dollar continues to drag the AUDUSD lower. Should prices descend below 0.6650, this could trigger a selloff to 0.6520. For bulls to jump back in, prices need to trade back above 0.6700 with 0.6850 acting as a key level of interest.

Bonus: S&P 500

Appetite for riskier assets has been hit by mounting geopolitical tensions. This may translate to more losses on the S&P 500 which remains bearish on the daily charts. A strong move below 3810 could result in a selloff towards 3700 and 3636. If bulls can push prices back above 3905, expect a potential incline towards 3945 and the 100-day SMA at 4000.

Bonus: Gold

How gold performs this week will be heavily influenced by the Fed meeting on Wednesday evening. As highlighted earlier, the precious metal remains under pressure and could be in store for more punishment if the dollar and Treasury yields jump. A move below $1655 could swing open the floodgates, dragging prices towards $1600 and lower.