There has been a strong bullish rally in the USD/HKD pair after it hit the critical support level at 7.7534. From that level, the bulls took control of this market and push the pair towards the record high at 7.8502. The bulls attempted three times to break above the critical resistance level at 7.8502 but the bearish managed to limit the upside momentum. Currently, the pair is slowly heading towards the major resistance level at 7.8502 and any bearish price action confirmation signal might offer excellent selling opportunity. But the traders advised limiting the risk factors to a great extent since shorting the pair would be trading against the prevailing medium-term bullish trend.
USD/HKD technical chart analysis
Figure: USD/HKD slowly heading towards the major resistance level
From the above figure, you can see the bulls have made several attempts to clear the critical resistance at 7.8502. Surprisingly this level is refueling the sellers in the global market and pushing the USD/HKD pair lower. According to the professional traders in the Forex trading industry, breaking above the critical resistance level at 7.8502 level will be extremely hard for the sellers. Unless we see massive weakness in the U.S economy, the pairs are most likely to trade below this level.
Bearish scenario
A daily closing of the price above the critical resistance level at 7.8502 will confirm the continuation of the bullish trend in the USD/HKD pair. This will eventually lead this pair towards another record high which is highly unlikely at the present condition of this market. But technically, the bulls might manage to break this level since even though they have three failed attempts. But trading the breakout is not going to be a wise decision until we have bullish price action confirmation signal.
Bearish scenario
The overall technical parameters in the USD/HKD pairs strongly suggest the bears. Any bearish price action confirmation signal right at the critical resistance level at 7.8502 will be an excellent opportunity to execute short orders. But the traders are advised not to execute short without having any confirmation signals. The pro traders are expecting ranging market near the 7.8502 marks since significant weakness in the green bucks is required to see a decent dive in this pair. The first initial bearish target for this pair is at the nearest critical support level at 7.8273. A clear break of this level will eventually lead this pair towards the next critical resistance level at 7.7923. But for that, we will have to wait for the major news release.
So, it’s very obvious, trading the pair with position trading strategy is not going to work. However, short term selling opportunity might offer decent profit-taking opportunity to the retail traders.
Fundamental factors
The recent performance of the U.S economy is not up to the market but the optimistic dollar bulls are expecting a strong turnaround from the mighty green bucks. But in the absence of scheduled high impact news in the upcoming week, we are most likely to experience ranging market in the USD/HKD pair. However, any rejection of the critical resistance level should provide you short term profit-taking the opportunity.
On 6th September, we have NFP data release and strong positive data might help the dollar bulls to take out the critical resistance level of this pair. But still, NFP data might not be enough to clear this resistance level. If the price of this pair trades near the critical resistance level, a rate hike from the FED might help to clear out this resistance level. To be precise we need a strong fundamental catalyst to overcome the mighty resistance level. On the contrary, a week NFP data will boost the bears and push the USD/HKD pair significantly lower on the global market.