18fxM

Technical Update - Major trend reversals in EURUSD, USDJY and Dollar Index?

Forex 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  USD weakness seems to have come to and end. Reversal patterns in EURUSD and Dollar Index
USDJPY bouncing off strong support area


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EURUSD
has over the past couple of months formed rising wedge like pattern on the daily chart. EURUSD has now broken bearish out and below support at around 1.08..
RSI divergence has warned about a weakening of the uptrend in EURUSD and a looming correction/trend reversal. RSI is still bullish however, and needs to close below 40 for that to reverse.
Support at around 1.0480 close to the 0.382 at 1.04
eurusd d 7feb
Source all charts and data: Saxo Group

However, on weekly chart EURUSD came last week within few pips touching the 0.786 retracement at 1.1057 before collapsing forming a Shooting star like candle. A Shooting star indicates a top and reversal. (Shooting star is a candle with a tall upper shadow but no lower shadow. A body that is fairly small at the lower end of the candle)
RSI is still bullish with no divergence which tells us that higher levels cannot be ruled out. A move above last week’s peak at 1.1033 will most likely push EURUSD to 1.1170 - 1.12.
If EURUSD closes below 1.0480 the medium-term trend has reversed to bearish.

eurusd w 7feb

USDJPY jumped Monday morning to test minor resistance at around 132.87 and the 55 daily SMA. The Jump came after USDJPY had shown RSI divergence for weeks. A surge4 Friday off the upper trendline in the falling channel have laid the foundation for a bigger bounce.
RSI is still be bearish however, and needs to close above 60 to reversal that. If USDJPY  closes above 133 there is short-term potential to 0.382 retracement and the 200 daily SMA. Strong resistnace at around 137.85.

Medium-term the support area at 126.30- 126.85 seems to be too strong for Bears to push USDJPY below. Currently hovering around the 55 weekly SMA which is rising there could be further upside despite RSI being negative.
Some resistnace at around 134.77.

usdjpy d 7feb
usdjpy w 7feb

The Dollar Index (DXY) jumped back above previous resistance at 101.30 AND back above 103.20. Currently testing the 55 daily SMA and close to the upper falling trendline. A close above is likely to fuel a rally up to around the 200 daily SMA and the 0.786 retracement od the falling channel at 106.35. Resistance at around 105.00-105.50.

Weekly chart: Thee weeks in a row the Dollar Index has closed above key support at 101.30 and has formed an Evening Doji morning. (Circled).  It indicates of a bottom and reversal.  
A reversal that is likely to lift the Index back above the 55 weekly SMA to test the 105.50 resistance area .   
A close below 101.30 and the Dollar Index will resume and extend the down trend  

dollarindex d 6feb
dollarindex w 6feb

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