On the daily chart below, we can see that the breakout of the neckline at 1.1839 failed as the news flow started to come against the USD. First the miss in Jobless Claims, then the higher than expected unemployment rate and lower than expected wage gains in the NFP report, and finally the failure of the Silicon Valley Bank.
All these events impacted heavily the bond market with treasury yields falling off a cliff. The market repriced the terminal rate lower and even rate cuts by the end of the year were added to the equation. All of this in less than a week.
The US Dollar depreciated a lot due to this fast unwinding in hawkish bets and the other currencies benefited. The moving averages crossed to the upside which is a bad sign for the sellers.
On the 4 hour chart below, we can see that the trendline was breached and the buyers jumped in pushing the price to the resistance at 1.2143. The last line of defence for the sellers will be the resistance at 1.2265. Today we have the US CPI report and it’s likely that we will see a USD comeback in case data beats expectations, while a miss may add fuel to the greenback depreciation.
On the 1 hour chart below, we can see that there’s a divergence between the price and the MACD right at the 1.2143 resistance. This is a sign that the buying momentum is fading and we may see a pullback soon. The price may fall back to the 38.2% Fibonacci retracement level in a long covering move before the CPI report.
The buyers should step in there and if the CPI misses, they may pile in strongly. The sellers will need a break below that level to gain some conviction but ultimately, they will need a beat in the data to support the selling momentum.
