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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Head of Fixed Income Strategy
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Technical Update - EURUSD and GBPUSD likely resuming downtrend. USDCHF uptrend exhaustion, watch key support
Kim Cramer Larsson
Technical Analyst, Saxo Bank
- EURUSD and GBPUSD spiked higher but has failed to confirm and uptrend before sliding back. Both are likely to slide back further and confirm a return to bearish trends
- USDCHF uptrend in exhaustion mode. Key support at 0.90
EURUSD spiked late last week above the 55 and 200 daily Moving Averages and close to the 0.786 retracement at 1.0824 before retracing back below the 0.618 retracement at 1.0776.
In three tries, EURUSD has failed to close above the 0.618 retracement and RSI failed to close back above 60 thresholds. All Moving Averages are declining, putting a drag on EURUSD. All indicators are pointing to EURUSD resuming the downtrend.
If EURUSD is sliding below the 0.382 retracement at 1.0732 and RSI is closing below its lower rising trendline, EURUSD is likely to be hit with a sell-off down to the 0.786 retracement at 1.0646.
To establish a bullish trend, a daily close above 1.0885 is required. However, a close above last week's peak at 1.0813 AND an RSI close above 60 threshold will be a strong indication that scenario is to play out.
GBPUSD spiked to the 0.786 retracement at 1.2622 only to collapse back below the 0.618 retracement.
RSI failing to close above 60 threshold thus still showing negative sentiment, and with no divergence indicating GBPUSD is likely to resume downtrend and push lower in coming weeks.
A break below 1.2465 will confirm the bearish trend has resumed with downside potential to 1.23, but likely lower.
For GBPUSD to establish a bullish trend, a daily close above 1.2710 and an RSI close above 60 are required. Until then, it is merely just a correction.
USDCHF key support at 0.90! A break below is likely to fuel a sell-off down to the 0.382 retracement of the uptrend since its December low, i.e., down to 0.8883. Around that level, both the 200 and 100 daily Moving Averages are coming up, adding to the support.
RSI has been illustrating divergence for a few weeks by now, indicating uptrend exhaustion.
However, if USDCHF is closing above 0.92, the cross is likely to extend the uptrend towards 0.9425 resistance.
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