PlusMarkets Analysis • May 10, 2021
The dollar languished near a more than two-month low versus major peers on Monday as investors continued to assess the implications for monetary policy of a disappointing U.S. employment report, ahead of inflation data this week.
The U.S. created only a little more than a quarter of the jobs that economists had forecast last month and the unemployment rate unexpectedly ticked higher, pouring cold water on speculation the pandemic recovery could spark faster inflation that the Federal Reserve anticipates.
The dollar index, which measures the greenback against six rivals, stood at 90.178, after dipping as low as 90.128 for the first time since Feb. 26.
Notably, the British pound rallied 0.3%, rising as high as $1.4036 for the first time since Feb. 25, despite Scotland’s leader saying another referendum on independence was inevitable after her party’s resounding election victory.
“The USD’s choppy downtrend can continue this week,” Commonwealth Bank of Australia strategist Kim Mundy wrote in a client note, predicting a break above $1.22 for the euro.
“The unexpected slow recovery in the U.S. labour market reinforces the FOMC’s patient approach to monetary policy,” while “the improving global economic outlook is a medium-term weight on the USD.”
The euro rose 0.1% to $1.2172, earlier touching the highest since Feb. 26 at $1.2177.
The dollar was little changed at 108.57 yen, not far from its lowest since April 27.
The Aussie dollar ticked 0.1% higher to $0.78535, close to Friday’s more-than-two-month high of 0.7863.
Canada’s loonie rallied to a fresh 3-1/2-year high of $1.2111.
GBP/USD has managed to settle above April highs.
GBP/USD gained strong upside momentum and is trying to settle above the resistance at 1.4050. RSI remains in the moderate territory, and there is plenty of room to gain additional momentum in case the right catalysts emerge.
If GBP/USD settles above 1.4050, it will head towards the next resistance level at 1.4080. A successful test of the resistance at 1.4080 will open the way to the test of the resistance at 1.4120. In case GBP/USD gets above 1.4120, it will move towards the resistance at 1.4150.
On the support side, the previous resistance level at at 1.4020 will serve as the first support level for GBP/USD. This level has been recently tested and proved its strength.
If GBP/USD declines below the support at 1.4020, it will move towards the next support at 1.4000. A successful test of the support at 1.4000 will push GBP/USD towards the support at 1.3980.
EUR/USD Technical Analysis
After forming a support base above 1.2000, the Euro started a fresh increase against the US Dollar. EUR/USD climbed above the 1.2050 and 1.2100 resistance levels to move into a positive zone.
Looking at the 4-hours chart, the pair gained pace after it cleared a connecting bearish trend line at 1.2020. There was a strong close above the main 1.2050 resistance and the 100 simple moving average (red, 4-hours).
The pair even climbed above the 1.2120 resistance and settled well above the 200 simple moving average (green, 4-hours). As a result, the pair cleared the last swing high at 1.2150.
An immediate resistance is near the 1.2200 zone. The next key resistance could be 1.2250. It is near the 1.618 Fib extension level of the key decline from the 1.2150 high to 1.1985 low.
On the downside, the previous resistance near 1.2120 and 1.2100 might provide support. The main support is now forming near the 1.2050 level.
Gold has been extending its gains after breaking above $1800 beforehand and changes hands near $1840. The yellow metal eyes additional upside – XAU/USD is set to test 200-DMA at $1851 amid US dollar’s dead cat bounce, FXStreet’s Dhwani Mehta reports.
RSI remains bullish, a test of 200-DMA likely on the cards
“The upbeat market mood amid vaccine optimism is underpinning the recovery in the Treasury yields, which saves the day for the dollar bulls, the greenback’s pullback appears shallow amid a risk-friendly market environment and dovish Fed expectations though.”
“Gold traders are taking a breather before resuming the uptrend. In absence of significant economic data from the US, gold prices will continue to remain at the mercy of the dollar and yields.”
“The odds remain in favor of the bulls, as they keep their sight on the 200-daily moving average (DMA) at $1851. Ahead of that the gold price needs to take out Friday’s high of $1843. Only a daily closing above the 200-DMA could call for a retest of the $1900 psychological barrier.”
“The Relative Strength Index (RSI) lies just beneath the overbought region, currently at 68.44, pointing to additional upside potential.”
“If the correction regains momentum, gold prices could fall back towards Friday’s low of $1813. The $1800 threshold could emerge as strong support for the XAU buyers.”
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