• AUD/USD is trading 0.21% lower on Friday.
  • There is a big consolidation period between 0.7064 and 0.6775.

AUD/USD 4-hour chart

AUD/USD is in full consolidation mode at the moment. The key level now on the upside is the yellow horizontal line at 0.70. If the resistance breaks then the red high on the chart of 0.7064 could be the next target for the bulls. AUD has really been up against it at the moment. The COVID-19 cases are rising and relations with China are turning sour. This comes after the government offers citizens in Hong Kong eaier access to residency.

On the downside, the purple diagonal trendline could be a support zone. But the two main support areas are the horizontal lines at 0.69 and 0.6775. The Relative Strength Index is making a bullish failure swing. This is when the price makes a higher low wave but the Relative Strength Index makes a lower low wave. The MACD histogram is currently in the red but the signal lines are still above the mid-point which is a bullish sign. 

AUD/USD Technical Analysis

Additional levels

 

  • The dollar index trades 0.12% lower on Friday.
  • The risk sentiment improved during the US session but the dollar remains mixed.

Dollar index 4-hour chart

The dollar index is in a clear downtrend looking at the chart below. On Friday, the price has been very stubborn and now it does look like a base formation is building. The orange support level at 96.34 was tested again on Thursday but the price bounced back. Once again the price moved lower in today’s (Friday) session but the market caught a bid even before it could reach the zone.

The dollar basket in the medium term is still making lower highs and lower lows. A break of the wave low of 96.23 would be the confirmation that this trend is set to continue lower. If this is the case then the low of on the chart would be under threat.

The indicators are looking bearish but the MACD histogram is green. The main signal lines are still under the zero area indicating that the downtrend is not over just yet. The Relative Strength Index is still under the 50 line and there is space for a move into the oversold area. If the support levels do give way then the indicator could move into oversold zones once again.

Dollar Index Technical Analysis

Additional levels

 

  • USD/CAD is just above flat on the session on Friday.
  • The price has broken back above a key intraday trendline.

USD/CAD 4-hour chart

USD/CAD is trading just above flat on Friday and it is fair to say the price did not respect the recent trendline break to the downside. On Thursday lunchtime (London hours) the price popped back up after there was some weakness in oil. Today even despite some weakness in the greenback elsewhere the price managed to hold up against the Canadian dollar.

Looking closer at the chart, the mean value area of the consolidation was the main resistance. This is where the price has touched on many occasions. Now the price looks like it may dip back below the trendline it previously broke. The key support level will then be at 1.35 and if the price does break there could be a good case for the pair to test the lows. 

The Relative Strength Index indicator is still above the 50 level. It did dip to the oversold level but quickly recovered and now there is more room to the downside if the price does manage to fall. The MACD is also still looking bullish, the histogram is green but the signal lines are very flat but just below the mid-line. If the price closes anywhere near the current levels then on the daily chart there would be a bearish shooting star candle. Having said that the 200 Simple Moving Average has been providing some support on the daily chart (not shown in this article).

USD/CAD Technical Analysis

Additional levels

 

Analysts at MUFG Bank, present a trade idea to short USD/SEK around 9.200, with a target at 8.900 and a stop loss at 9.3500. The idea reflects a bearish outlook for the US dollar. 

Key Quotes

“We still see scope for the USD to weaken further as the COVID crisis continues to ease. The value of the USD is not yet fully reflecting the sharp decline in US real yields. In contrast, real yields in Sweden have increased modestly since the COVID crisis began.”

“USD/SEK is still trading much higher than expected based on the adjustment that has taken place in real yield differentials  between the US and Sweden. At the same time, we have recently seen some divergence in the new COVID case growth between Sweden and the US. While the pick-up in US cases remains a concern and is putting a dampener on the recovery, new case growth in Sweden has fallen back sharply. It could encourage positive SEK sentiment in the near-term. A favourable outcome from the upcoming EU Leaders summit would also work in favour of a lower USD/SEK.”

“USD/SEK is close to key technical support provided by the early June lows at 9.1292 which if broken would open the door to further downside. The main risks  to the trade idea are that risk assets correct meaningfully lower thereby temporarily boosting USD demand.”

The Governing Council of the European Central Bank (ECB) will meet next week. Analysts at Danske Bank expected a repetition of recent comments from various board members. They see EUR/USD rising to 1.15 in three months. 

Key Quotes: 

“At next week’s ECB policy meeting we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections. We also expect they may decide not to use the EUR1,350bn PEPP envelope in full. No new initiatives are expected next week.”

“Markets may not be prepared for a ‘less dovish’ message and with abundant liquidity, PEPP and APP still ongoing, we would use the opportunity to buy into risk on trades in the EGB/Euro fixed income space.”

“Our key expectation is that the ECB will reiterate its stance towards supporting a recovery, with, not least, a focus on sovereign spreads. For spot FX, the direction and stance of the ECB and euro area fiscal politics are, in our view, quite well priced and communicated (though to a lesser extent when it comes to the outcome for Brexit). In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg.”

“We remain constructive and expect the broad USD to decline over the coming months. In turn, our 3M forecast is 1.15.”
 

  • GBP/USD is trading 0.22% higher after another bout of USD weakness on Friday.
  • The bull tried to push higher once again but there was not enough momentum to crack the wave high.

GBP/USD 1-hour chart

GBP/USD is trading higher on the session after another bout of greenback weakness on Friday. The bulls tried once again to push the pair higher but they didn’t manage to break 1.2669. One of the key features on the chart is the channel marked by the trendlines. The top of the channel has been tested and now the price could move lower to test the lower bound. 

The next support level is holding at 1.2580 at the red horizontal line. If the price does manage to break below the zone then it would make a lower high lower low formation, The chart is still in a clear uptrend but for the bulls to take full control again the blue resistance zone at 1.2669 would need to be broken. 

Looking at the indicators, they are both looking pretty bullish. The MACD histogram is green and the signal lines are above the midpoint. The Relative Strength Index has pulled away from the overbought level but remains above 50. This means that if there is a break higher there is still space to move into the overbought zone once again. 

GBP/USD Hourly chart

Additional levels