On the daily chart below, we can see that the price has clearly broken the 1.07 support zone and it’s now approaching the 1.05 handle. The whole move up from 1.02 to 1.10 in the past few months was diverging with the MACD.
Generally, when the price breaks the trendline that was supporting a rising channel-like price action (like in this case), the price pulls back at least to the bottom of the channel, which in this instance comes around 1.02. But first the price will need to break the strong support at 1.05.
On the 4 hour chart below, we can see that the price lately has been trending down nicely hugging the downward trendline. The moving averages were also acting as resistance for every pullback.
The fundamentals are now favouring the USD as the market reprices a higher terminal rate from the Fed due to recent beats in many key economic data. One risk here is that the price is also diverging with the MACD on the way down, so if we get a catalyst against the USD, we may see a quick pullback into the 1.07 handle.
On the 1 hour chart below, we can see that recently every pullback to the trendline found sellers. We should expect the same happening at least until we get to the 1.05 handle.
We are in an environment now where “good news is bad news” for the pair, so watch out for important economic reports beating expectations as those will act as catalysts for further USD appreciation.
