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USD’s Advance Pauses For Breath

ByXM Group
AuthorTrading Point
Published 09/30/2014, 03:42 AM
Updated 02/07/2024, 09:30 AM

The final day of the third quarter is witnessing the US dollar pause for breath after some outstanding gains during the past three months. According to some technical indicators, such as the Relative Strength Index, the greenback was quite overbought – say versus the Japanese yen – hence a pause was to be expected.

Looking back to the beginning of the quarter, it is worth pointing out the dollar’s big gains. EUR/USD was then trading above 1.36 while most recently it has been trading below 1.27 – a quarterly loss of around 1000 pips. For USD/JPY the starting point was the 102 level while it was trading above the 109 mark this morning, while for the UK pound, cable has dropped from 1.71 to 1.62. Following such outsized gains, it would appear that the dollar could use a rest on the final day of the quarter, which can be characterized by position-squaring and window-dressing as many investors report their end-quarter positions for performance purposes.

The pause in the dollar's rally helped the EUR/USD decline pause as well.

RSI is showing a strong downward momentum although it is at 22 in oversold territory, which implies the euro is temporarily oversold. EUR/USD has scope for further downside towards the November 2012 low of 1.2660 followed by the psychological level of 1.2600. To the upside resistance lies at 1.2800.

EUR/USD is strongly bearish as all technical indicators are in sell territory. Prices have been making lower highs and lower lows and the market is below the 200-day moving average. The daily Ichimoku cloud is falling while the tenkan-sen ad kijun-sen lines are negatively aligned.

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