Does the US dollar take a breather after strong couple of weeks or do we continue to see further gains?
The US dollar continued to show its strength in the currency markets last week and increased against the other major currencies across the board. Notably, the USD rose against the Australian dollar, New Zealand dollar, Canadian dollar, Swiss franc, British pound and the euro for a second straight week while advancing against the Japanese yen for third consecutive week.
Major Currency Pairs:
EUR/USD: The euro closed lower on Friday for a second consecutive weekly decline. This is the lowest weekly decline since late March. Further decline this week will bring up a test of the 1.2750 level which has been a recent support level in March and November. This price level was also a resistance level in both May and June of last year so 1.2750 is worth watching. If we see prices advancing this week, look for the 1.2875 level, 1.2930 level and the 1.3000 major levels to come into play.
GBP/USD: The British pound sterling decreased last week for a second consecutive week and closed at the lowest level since the middle of March. This pair ended the week lower than the 1.5250 level which had acted as a major previous support and resistance threshold. Looking ahead, we see overhead resistance at the 1.5220 to 1.5250 price points and lower support levels coming in around the 1.5150 and 1.5100 levels before the major psychological level of 1.5000 becomes focus.
USD/JPY: The US dollar continued its surge against the Japanese yen and closed higher for a third straight week. This pair closed over the 103 level of the first time since October 2008 as the Bank of Japan’s use of monetary policy to fight deflation has sharply weakened the yen. Short-term support for this pair looks to be 102 with major 100 level for the time being in the rear-view mirror. Further upside momentum may see the 103.50 level as potential short-term resistance level before the major 105 comes more into focus.
USD/CHF: The US dollar continued its gains against Swiss franc also for a second consecutive week. The pair topped out around the 0.9750 level before closing the week lower at 0.9720. Any further gains would have to re-test the mentioned 0.9750 level while on the downside immediate support likely comes in around the 0.9630 to 0.9650 area. Further down the line on the descent sees the 0.9550 to 0.9560 area shaping up as a support level.
USD/CAD: The US dollar rose for a second straight week last week versus the Canadian Loonie and also had its highest close in approximately 10 weeks. This currency pair on weekly chart is trading in a wedge formation that may take another few weeks to determine a breakout direction. This pair finished the week over the 1.0250 level which looks to provide the closest support on downside movement. Overhead resistance is seen at the 1.0300 price with the 1.0350 level lurking above. Any trading over the 1.0340 level will be the highest levels seen since June 2012 when this pair reached as high as 1.0441.
AUD/USD: The Australian dollar continued to sharply decreased against the US dollar closing the week below the 0.9750 level. Trading started the week right around the parity level and despite a small pause on Wednesday, the Aussie was heavily sold off most of the week. On the downside, the 0.9650 level looks to see some support before the 0.9500 major support and resistance level comes into play. Upside momentum would likely see resistance in the 0.9850 area.
NZD/USD: A similar picture to how the Aussie is trading. The Kiwi fell sharply for a second straight week and closed below 0.8100. A test of 0.8000 seems to be in the offing next week on further declines while the 0.8100 and 0.8150 areas are potential to provide resistance above.
Next Week’s Major Economic Event Highlights:
Tuesday, May 21
Australia — reserve bank meeting minutes
New Zealand — reserve bank 2-yr inflation expectation
United Kingdom — consumer price index
United Kingdom — producer price index
Wednesday, May 22
Japan — Bank of Japan rate decision
Japan — monetary policy update
United Kingdom — Bank of England minutes
United Kingdom — retail sales
United States — Ben Bernanke testimony
United States — FOMC meeting minutes
United States — existing home sales
Canada — retail sales
Thursday, May 23
United Kingdom — GDP report
China — PMI manufacturing
United States — jobless claims weekly
United States — new home sales
New Zealand — trade balance
Friday, May 24
Euro zone — Germany GDP report
euro zone — Germany business climate index
United States — durable goods orders report
see our economic calendar for full listing
Written by Zac Storella, CountingPips Forex Blog & Currency Pair Technical Analysis
