The US Dollar keeps promises by remaining strong against most of the major currencies with back to back positive impact from financial data. However, US CPI increased by 0.9% in June 2021 after a 0.6% increase in May, which is the most significant 1-month increase since June 2008. Although the market showed a mixed sentiment from the US CPI, the broader US Dollar strength came from better-than-expected retail sales on Friday that came at 1.3%, beating the expectation of 0.4%.
The US Dollar strength is expected to continue this week while investors will focus on what ECB says about the inflation and PEPP. ECB president Christine Lagarde mentioned earlier that the inflation rate above 2% will be flexible for tightening the monetary policy. Besides, German PMI’s are going to be released on Friday where the current expectation is above the 50.0, satisfactory level.
Overall, the market sentiment for this week may remain positive for the US Dollar while any uncertain movement in the US government bond yields may alter the market direction.
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Forex Technical Outlook for 19 July 2021 to 23 July 2021
The week will start with AUD monetary policy minutes on Tuesday and ECB Monetary Policy Statement on Thursday. Furthermore, the German Flash Manufacturing PMI will be released on Friday along with CAD retail sales.
So, considering the above economic releases, let’s see what might happen in the coming days:
Although the regular divergence was in play on the daily chart of EUR/USD, the price failed to hold the bullish momentum above the 1.1831 support level. Price made a daily close above this level but could not create a new high with a minor resistance from the dynamic 20 EMA. As a result, the price moved lower below the 1.1831 support level and heading lower.
The price is highly volatile in the daily chart, with multiple violations of near term swing levels on the intraday chart. Moreover, the bearish pressure on Thursday and Friday failed to make a new low as well. Therefore, investors should wait for a bullish correction where any rejection from dynamic 20 EMA may increase the selling pressure towards the 1.1766 area.
Besides, any surprise from ECB with a stable bullish daily close above the 1.1831 level may increase towards the 1.20 area.
GBP/USD failed to hold the buying pressure from the 1.3800 support level and moved lower following multiple rejections from the dynamic 20 EMA on the daily chart. Therefore, as long as the price is trading below the 1.3800 support level, it has a higher possibility of moving lower this week.
The above image shows that the price is below the Ichimoku Kumo Cloud in the daily chart where the Future cloud is bearish. Moreover, the price is getting minor resistance from the dynamic 20 EMA and Tenkan Sen, increasing the selling pressure towards the 1.3680 support level.
However, a strong bullish daily close above 1.3800 and dynamic 20 EMA would invalidate the bearish sentiment.
AUD/USD faced a bearish pressure last week that came from the weaker than expected Chinese GDP and Australian employment release. China is the biggest trading partner of Australia, and any weakness in China’s data puts bearish pressure on the AUD/USD.
Last week, AUDUSD failed to sustain above the 0.7377 support level and moved lower with a strong bearish daily close of Thursday. Moreover, on Friday, the price made a new swing low, violating the previous week’s price action. Therefore, the overall outlook for this week would be bearish for AUDUSD, after a considerable correction.
The AUD/USD daily chart shows that the price broke below the 0.7400 psychological number with a bearish daily close. However, the gap between the price and dynamic 20 EMA has expanded, creating a possible bullish correction as a mean reversion.
In this price context, the price has a higher possibility to correct higher towards the 0.7477 event level, and any rejection from the dynamic 20 EMA may increase the selling pressure in the coming days. On the other hand, MACD Histogram is still corrective with a hidden divergence in play. Therefore a bullish D1 close above 0.7477 with a positive MACD Histogram may invalidate the current bearish possibility.
The broader US Dollar strength failed to provide a reliable bullish sentiment in the USDJPY price. After the channel breakout, the price corrected higher above the 110.40 event-level but failed to hold the bullish momentum. As a result, the price moved lower below this level with a strong bearish daily close.
In the USDJPY daily chart, the price is trading below 110.40 with a bearish daily close that created an opportunity of further selling pressure this week. Therefore, any break below the 109.69 support level with a bearish daily close may take the price lower towards the 108.47 area.
On the other hand, Japan’s bank holiday on Thursday and Friday may decrease the liquidity in the price, and traders may face a corrective momentum this week. However, the bearish sentiment may continue as long as the price is trading below the 110.40 event level.
After a lot of volatility, Gold moved higher above the 1814.00 event level with an impulsive bullish pressure. However, the price corrected lower on Friday but still traded above the dynamic support level.
This week, a US Dollar correction is expected to grow in the birth period where any bullish daily close above the 1814.00 level may take the Gold higher towards the 1840.00 level.
However, Gold is still trading within the strong bearish trend, starting from mid-June. Therefore, any break below the 1800.00 support level with a bearish daily close may resume the broader selling pressure towards the 1765.00 support level.
Bitcoin bulls are critical as the price remained bearish below 35800.00 event level with a bearish pre-breakout structure. In that case, the overall outlook for this week would be bearish until the price breaks above the 35800 event level.
The price is approaching a psychological 30,000 support level in the daily chart while dynamic 20 EMA is moving lower by providing resistance. Therefore, any bearish daily close below the 30,000 level may initiate a massive selling pressure in the price towards the 20,000 level.
On the other hand, Any bullish daily candle above dynamic 20 EMA may initiate a broader correction to the price. Furthermore, a daily close above 35,800 level is the primary requirement for the possible intense buying pressure.
Overall, this week may start with a broader US Dollar correction. Moreover, investors should closely monitor how the ECB provides the monetary policy statement. Any Dovish tone with the flexibility in inflation target and PEPP may create a sharp fall in the EURUSD.
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