Mid-Week Technical Outlook: FX Mashup

Ongoing concerns over China’s economic growth have sent investors rushing toward the dollar with growing bets around US interest rates staying higher for longer supporting upside gains!

The USD Index is lingering around levels not seen in six months and could push higher thanks to technical and fundamental forces. As the dollar continues to flex its muscles, this could mean more pain for G10 currencies which have all depreciated since the start of the week.

Here are some technical setups to keep an eye on:

Dollar approaches 105.00

The USD Index remains firmly bullish on the daily charts as there have been consistently higher highs and higher lows. Prices are trading well above the 50,100 and 200-day SMA while the MACD trades above zero. A solid breakout above 105.00 could open the doors to levels not seen since March 2023 above 105.80. Should 105.00 prove to be reliable resistance, a decline back towards 104.10 and the 200-day SMA could be on the cards.

EURUSD bears in power

After cutting through the 1.0800 support level, euro bears were given the green light to switch into a higher gear. Prices are heavily bearish on the daily charts with the negative momentum opening a potential path towards 1.0670 – a level not hit since June 2023. For bulls to jump back into the game, a solid move back above 1.0800 needs to be achieved. Given how the Relative Strength Index (RSI) is approaching oversold regions, a rebound should not be ruled out.

GBPUSD ready to challenge 200-day SMA?

The recent breakdown below 1.2600 may inspire a further selloff towards the 200-day SMA at 1.2430. Technical indicators remain in favour of bears with prices trading below the 50 and 100-day SMA while the MACD trades below zero. Should prices push back above 1.2600, the GBPUSD may find itself trapped within the previous range with resistance around 1.2800.

AUDUSD tests key support

In our week ahead report last Friday we questioned whether the AUDUSD would experience a double-bottom bounce. Despite prices later tumbling on Tuesday after the Reserve Bank of Australia (RBA) left interest rates unchanged, the 0.6378 support continues to fend off bears. Should this level hold, prices may rebound back towards 0.6500. Alternatively, a selloff below 0.6378 could see a decline towards 0.6300.

USDJPY breakout strengthens bulls

After breaking and securing a daily close above the 146.70 resistance yesterday, the USDJPY could see further upside from a technical perspective. The next key level of interest can be found at 149.00. A move back below 146.70 may open a path back towards 144.90.

USDCAD gearing for more upside?

With the Bank of Canada rate decision around the corner, the USDCAD could see some heightened volatility today. It may be wise to keep a close eye on the 1.3650 resistance which has held since May 2023. A solid break above this point could trigger a further incline towards 1.3740. Any signs of weakness that take prices away from 1.3650 could invite bears to target 1.3500.