Weekly Technical US Dollar Forecast: Rally Fizzling, Bears Retaking Control

Weekly Technical US Dollar Forecast: Rally Fizzling, Bears Retaking Control

TECHNICAL FORECAST FOR THE US DOLLAR: NEUTRAL

  • The US Dollar (via the DXY Index) saw all of its weekly gains evaporate following the May US nonfarm payrolls report as US Treasury yields receded.
  • Net-long US Dollar positioning has climbed for four consecutive weeks.
  • The IG Client Sentiment Index suggests that the US Dollar has a neutral bias across the board, but for USD/JPY rates, which is bearish.

US DOLLAR RATES WEEK IN REVIEW

The US Dollar (via the DXY Index) was off to a strong start through the first week of June until it ran into the May US nonfarm payrolls report on Friday. Receding US Treasury yields around the data provoked a significant technical reversal in the DXY Index, seeing the gauge close out the week only up by +0.09% after being up by +0.63% at its weekly high. As a result, many USD-pairs have long wicks on the weekly charts, suggesting that US Dollar selling pressure remains as the calendar moves into the second week of June.

EUR/USD RATE TECHNICAL ANALYSIS: DAILY CHART (MARCH 2020 TO JUNE 2021) (CHART 1)

Weekly Technical US Dollar Forecast: Rally Fizzling, Bears Retaking Control

EUR/USD rates retraced their early week losses to settle above former consolidation resistance that defined price action starting in mid-April. Bullish momentum has waned, with the pair intertwined among daily 5-, 8-, 13-, and 21-EMA envelope, which is still in neither bearish nor bullish sequential order. Daily MACD is falling while above its signal line, and daily Slow Stochastics are dropping through their median line. More stability in price action is sought before it be discerned if EUR/USD rates are tracking towards the 2021 high at 1.2350.

IG CLIENT SENTIMENT INDEX: EUR/USD RATE FORECAST (JUNE 4, 2021) (CHART 2)

Weekly Technical US Dollar Forecast: Rally Fizzling, Bears Retaking Control

EUR/USD: Retail trader data shows 36.61% of traders are net-long with the ratio of traders short to long at 1.73 to 1. The number of traders net-long is 21.22% lower than yesterday and 7.24% higher from last week, while the number of traders net-short is 10.59% higher than yesterday and 2.23% lower from last week.

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