The dollar bulls remain ahead amid renewed banking concerns as well as risk aversion ahead of key economic data.
dollar
The dollar is trading in the middle of the week after finding some important support around the yearly low at 100.88, This led to the largest daily rise in a week. The factors driving this renewed buying interest can be linked to fading risk tolerance on the part of investors, which was largely driven by renewed fears of banking fallout as disappointing earnings data from First Republic Bank failed to instill confidence. In addition, concerns about the expiration of the US debt ceiling affected risk appetite and allowed DXY speculators to stay ahead.
Looking ahead, traders will be eyeing US economic data in the form of March Durable Goods Orders, which will give traders some clues regarding the first quarter GDP numbers on Thursday. If tabular data shows pessimistic results, against the expected 0.8% and -1.0% prior, the US Dollar Index could consolidate the recent gains.
Technical Analysis (D1)
Regarding the market structure, the current price action has formed a possible reversal pattern in the form of a downward channel. The pattern, which was partially validated as an impulsive break of the structure, moved to the upside as the bulls took control of the narrative ahead of the next corrective wave. From now on, the price can remain bullish if buyers can defend the potential bearish channel continuation pattern that is currently forming. On the contrary, if the sellers break through the support level around 100.40 level, the narrative could turn towards the bears and break below the year low.
euro
The European common currency is heading into the middle of the week under slight pressure as it loses some control over recent developments made by posting its biggest daily loss in 6 weeks. The factors attributed to this recent selling pressure can mostly be linked to the dollar’s dynamics as buyers begin to take positions on the US dollar amid jitters ahead of the Fed’s pivotal monetary policy meeting next week.
Looking ahead to the rest of the week, traders will be watching the dollar’s economic data as well as any developments on policy actions from the European Central Bank in their ongoing battle against inflation in the Eurozone.
Technical Analysis (D1)
In terms of market structure, the current price has approached an area with sideways selling pressure in the form of an ascending channel. This pattern gives the speculators the potential to drive the price if the current continuation pattern plays out successfully, confirming the potential for a larger double top reversal pattern to form. Conversely, if the bulls can maintain pressure, the price may break above the level and continue to the upside if it nullifies the resistance area in an impulse wave.
fairy
The Pound is heading into the middle of the week licking its wounds on the back of the biggest drop in 8 trading days. Factors driving this increased selling of the British currency can be linked to lower demand for riskier currencies amid banking turmoil as well as the general pre-economic data situation inherent in the market ahead of next week’s Fed policy decision. Adding to risk aversion is news that the UK’s debt-to-GDP ratio has reached 100%, its highest level since the 1960s, which ultimately discouraged currency buyers from taking larger positions.
Looking ahead, traders will be watching US economic data to give some directional impetus to the pound, in the absence of any relevant data coming out of the UK calendar.
Technical Analysis (D1)
In terms of market structure, the bulls were in control of the narrative and the price tested the key 1,244 The level has since declined, forming a possible bearish double top. As the price retests this peak formation again, two scenarios present themselves. Namely, if the sellers defend the area in the current bullish channel continuation pattern, this could validate the potential reversal pattern. Conversely, if buyers break above the area, the price will continue to move upwards in the near term.
gold
Gold is heading into the middle of the week under some pressure as it reverses a 2-day uptrend. The factors driving this lower interest from buyers in the yellow metal can be linked to the cautious optimism seen by traders ahead of US durable goods data as well as the Fed’s highly anticipated policy meeting next week where interest rates will be on top. Additional factors influencing risk sentiment come in the form of US Treasury Secretary Janet Yellen, who made comments that if Congress failed to raise the government’s debt ceiling, it would lead to defaults which could lead to an “economic disaster” that would lead to “economic disaster”. The effect of causing interest rates to rise higher than currently expected.
In terms of market structure, price action has been mostly bullish, with higher highs and higher lows being printed. The current price action is approaching the February 2022 high in a corrective wave associated with a possible ascending channel reversal pattern. From now on, price action should be given a chance to print itself to either validate the reversal pattern or to nullify it by continuing to rise impulsively towards the aforementioned peak.
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Ofentse Waisi
Market analyst
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