Dollar risk on the downside

Dollar’s recovery this week is less than impressive so far, still held by intraday resistance against majors. A Japanese Jiji wire report quoted an official from China’s statistical bureau as saying that China needs to continue diversify dollar reserves due to the dangers of holding too many dollars. Such news has given dollar some pressure since Asian session. Dollar could continue to trade with an undertone through out European session till consumer confidence and housing data from US.

July consumer confidence is expected to drop slightly from June’s 105.7 to 104.0. But bare in mind that June’s data has indeed given us an upside surprise which was originally forecasted to be 103.5 by economists. Given that conditions actually worsened by increasing geopolitical risk and energy price, a downside surprise in this month’s consumer confidence is not unlikely.


Daily Pivots: (S1) 1.2591; (P) 1.2650; (R1) 1.2691

EUR/USD’s retreat from 1.2706 has reached 1.2603 only, held above mentioned cluster support of 1.2584 (50% retracement of 1.2457 to 1.2706 at 1.2582). As long as downside is contained by 1.2584, chances still favor further rebound. On the upside, break of 1.2707 (61.8% retracement of 1.2861 to 1.2457) will start to argue that the whole corrective fall from 1.2978 has completed with three waves down to 1.2457 and bring short term falling trend line (from 1.2978 to 1.2861, now at 1.2803) into focus. On the downside, break of 1.2584 will indicate a short term top is formed and further weakness towards 1.2457 low could be seen.

In a bigger picture, since weekly MACD’s turn below signal line is slightly favoring the case that corrective fall from 1.2978 represents consolidation to the whole medium term rally from 1.1639. Failure to break above mentioned short term rising trend line or a fall below 1.2457 will strongly suggest that price actions from 1.2978 is developing into larger consolidation to whole medium term rally from 1.1639. But still, medium term bullishness will remain as long as downside is contained by key cluster support of 1.2322 (50% retracement of 1.1639 to 1.2978 at 1.2309).

Meanwhile, break of this falling trend line will encourage a retest of 1.2978 high. But sustained trading above 1.2978 is needed to confirm rally from 1.1639 has resumed for next upside target of 78.6% retracement of 1.3668 to 1.1639 at 1.3234.

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