After a good first quarter in April the dollar lost ground against the main currencies

May 11, 2021

If during the first quarter of this year we commented that the U.S. dollar was experiencing a rebound against the main currencies, and as we commented in past analyses, during last April, the dollar yielded 2.11% compared to the main currencies with a decrease reflected in the dollar index from the $93.36 with which it opened last April to the $91.27 rate at the end of the month.

This decline can be explained by the relaxation in the yields of North American bonds and the uncertainty in relation to whether or not the Federal Reserve will finally make a decision on its current monetary policy, in terms of tightening it due to the economic recovery. However, these doubts seem to have dissipated for the moment, following the bad unemployment data on Friday.

Specifically, in the employment data for last April, we can see that not only were they not lower than those of last month, but they fell far short of market expectations after creating 266,000 jobs compared to the 770,000 expected, negatively impacting the dollar.

EURUSD analysis

Market attention last week focused mainly on employment data from the United States after the important NFP was released on Friday. This data was especially bad, since 266,000 jobs were created compared to the 770,000 expected, affecting the dollar significantly, so the EURUSD managed to overcome the medium-term downtrend line.

Technically speaking, the break of this trend line can cause a new upward momentum that takes the price to levels not seen since the beginning of the year, although for this we must be attentive as to whether the price is able to maintain this break. On the contrary, the loss of the 18 session average would in turn endanger the 1.20 level and open the doors to a further decline.

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Source: Daily chart of the EURUSD of the Admiral Markets MetaTrader 5 platform from January 23, 2020 to May 10, 2021. Taken on May 10 at 12:45 CEST. Note: Past performance is not a reliable indicator of future results, or future performance.

Evolution of the last 5 years:

2020 = + 8.93%
2019 = -2.21%
2018 = -4.47%
2017 = + 14.09%
2016 = -3.21%

GBPUSD analysis

In the case of GBPUSD, we can see that this pair is following a very clear upward trend since it marked minimums on March 20, 2020 around the level of 1.14100 until it almost reached the level of 1.42366, which led it to exceed its long-term downtrend line (in dotted red).

As we can see in the weekly chart, after marking maximums last February, the EURUSD price began a correction that led it to lose the important level of 1.40. This was in search of its average of 18 sessions, where it has found an important support point to start a new momentum that has led it to break above not only the 1.40 level but also to trade at levels close to 1.41.

As long as the price does not lose its average of 18, the feeling will continue to be bullish. The final loss of the 1.40 and the 18 average would unlock a further correction to the previous resistance level in red.

Source: GBPUSD weekly chart from Admiral Markets MetaTrader 5 platform from September 28, 2014 to May 10, 2021. Taken on May 10 at 1:10 p.m. CEST Note: Past performance is not a reliable indicator of future results, or future performance.

Evolution of the last 5 years:

2020 = + 3.10%
2019 = + 3.95%
2018 = -5.54%
2017 = + 9.43%
2016 = -16.26%

USDJPY Analysis

Finally, if we take a look at the USDJPY pair, we can observe how the Japanese Yen was one of the currencies that was greatly affected by the increases in the dollar. This is because, during the rises in February and March, it went from trading at levels close to 102,700 to trading at levels close to 111,000. As we can see in the weekly chart, after facing its important support level for a long time, represented by the red band, the price definitely bounced past the 200 red average and the long-term downtrend line.

As we have commented previously, during the month of April this currency pair fell by 1.29%, leading the price to find the coincident zone of its 200 session average and the downtrend line, thus leaving the accumulated overbought.

Technically speaking, we must pay attention to the evolution of the price in the coming weeks, since if the price confirms the upward break of the previous resistance levels that currently act as the main support, the price could look for the upper band of the lateral channel in green. On the contrary, if the price re-enters lower levels, we could obtain a greater correction.

Source: Weekly USDJPY chart from Admiral Markets MetaTrader 5 platform from December 14, 2014 to May 10, 2021. Taken on May 10 at 1:15 PM CEST. Note: Past performance is not a reliable indicator of future results, or future performance.

Evolution of the last 5 years:

2020 = -4.95%
2019 = -0.88%
2018 = -2.76%
2017 = -3.59%
2016 = -2.85%

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