TECHNICAL ANALYSIS OF THE EURO/USD
Following Wednesday’s severe sell-off, the EUR/USD recovered momentum on Thursday, bouncing off horizontal support at 1.0640/1.0600. While the euro’s chances have begun to weaken in recent days, the bullish argument should not be dismissed just yet, as buyers appear to be returning to the market and are bent on targeting a critical ceiling placed just below the psychological 1.0800 level.
The next few sessions will be crucial in determining the near-term directional bias, so traders should pay close attention to how price action evolves and responds to significant technical zones. However, there are two situations to consider: 1) clearing of cluster resistance extending from 1.0750 to 1.0785, and 2) upward fatigue and rejection from current levels.
If the first scenario plays out and buyers force the exchange rate over 1.0750/1.0785, sentiment might improve, clearing the way for a move toward the 50-day simple moving average, which is now sitting just below the 1.0900 level. In contrast, if the second scenario plays out and sellers trigger a bearish reversal, EUR/USD may soon be on its way to retesting its May lows.
TECHNICAL CHART OF EUR/USD
TECHNICAL ANALYSIS OF THE USD/JPY
USD/JPY rose in May on expectations that the Fed will continue raising rates at forthcoming FOMC meetings, but expectations have turned in a more dovish direction in recent days as several officials advocated for a “pause” to examine the lag effects of previous tightening. In this environment, markets have essentially priced in a 25 basis point increase in June, causing the US currency to fall.
In terms of technical analysis, the USD/JPY began to retrace after failing to cross overhead resistance placed just above the psychological 140.00 level. Sellers retook control of the market from those levels, driving prices down toward the 138.00 region – the next key support in play. If this floor breaks way in the next sessions, bears may gain confidence and start an attack on short-term trendline support at 135.90.
If, on the other hand, USD/JPY pivots higher and maintains its upward trend, the first barrier to watch is at 140.50/140.90. Successfully sailing over this ceiling should fuel higher momentum, paving the door for a climb above 142.45, the 61.8% Fibonacci retracement of the October 2022/January 2023 fall.
TECHNICAL CHART OF USD/JPY
TECHNICAL ANALYSIS OF THE USD/CAD
USD/CAD surged above its April highs earlier this week, but was immediately pushed lower, with the pair selling off and forming the second leg of a double top pattern on Thursday – a bearish formation, according to technical analysts.
A double top is a reversal pattern consists of two comparable peaks separated by an intermediate trough that frequently arises in the context of a protracted climb upward. The setup is complete when the price completes its “M” form and breaks below the neckline, which serves as the pattern’s basis. In this situation, the neckline is somewhat higher than the 1.3300 handle.
The size of the expected downward move may be calculated by projecting the height of the double top from the break point vertically. Over the medium run, this might imply a drop toward 1.2960 for USD/CAD.
TECHNICAL CHART OF USD/CAD
