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Dollar bounces back: analysis of USD/CHF, AUD/USD, USD/JPY, EUR/USD and gold

We are seeing the US dollar making a comeback this morning (13 April) after a period of weakness for at least the last few weeks. We talked about the USD/CHF last week and how it was approaching a very important support level around the 0.9550 area. The pair overran as far as 0.9498/0.9495 but is now finally staging a strong recovery as hoped, as we reach 0.9630.

The AUD/USD appears to have formed a short-term double top pattern with the March high at 0.7721 and today’s high at 0.7715. This negative pattern signals the dollar can push higher in at least a correction phase and potentially re-target the April lows so far at 0.7510/0.7490. You can see from the chart below that there is some support around the 0.7390/0.7380 area.

As I say, at this stage the dollar is only in a correction phase as we push higher. We will need to watch carefully in the days ahead for more bullish longer-term signs that would signal a resumption of the bull trend.
The USD/JPY is also bouncing back from a low of 107.61 on Monday to reach a high of 109.30 so far today. Just like the other pairs, USD/JPY had become very oversold on the daily chart, and like the other pairs is seeing the stochastic start to turn higher, signalling that the bullish correction could continue into at the least the end of the week.

The lower trendline of the consolidation channel, which formed from the middle of February to the beginning of April, looks like a reasonable target for this bear correction. This is around the 110.40 area with the March low just above at 110.65 and the February low at 110.98. These are all significant barriers to the recovery and, interestingly, we also have a 23.6% Fibonacci resistance at exactly 110.98. Therefore, if bulls are going to reverse the recent negative trend, we’re going to have to see sustained moves above the 111.00 area.
The EUR/USD had traded sideways for nine sessions and, although we did make a couple of new highs throughout that period, eventually reaching 1.1464 yesterday, we saw dojis form on each of the last eight sessions with the close very near to the open, despite relatively wide ranges during the day. Finally it appears the market may have some direction as the dollar pushes higher against the euro and we start to move back below the six-month trendline you see in the chart below.

To add to the negative sentiment we are also back below the February high at 1.1375 and the March high at 1.1342. Again you can see how the euro was very overbought against the dollar, so this is at least a correction phase that could last a few days, allowing the overbought conditions to unwind.
Gold had benefited very well from the recent bout of dollar weakness. I mentioned gold in my article last week and how we needed a break above 1236 and 1245 to see some further positive moves. We made it as far as 1262 yesterday, but have slumped quite significantly from there on the strong dollar and are now trading around 1241/1240.

Gold had also become overbought against the US dollar and there is even a risk that we are forming a negative head and shoulders pattern, which has more negative implications for the weeks ahead. However, we will have to wait for confirmation before getting aggressively short, which will come in the form of a break below the neck line around the 1220/1215 support area.
Jason Sen
Technical Analyst & Trader
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The content of this article is the personal opinion of the author and not InterTrader Direct. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest. Nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.

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