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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Head of Fixed Income Strategy
Technical Update - Navigating EURUSD's indecision, and GBPUSD and USDCHF's corrections in their uptrends
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: It seems like EURUSD is caught in a tug of war, with conflicting signals from short, medium, and longer-term Moving Averages causing a lack of clear direction.
GBPUSD, on the other hand, is in an uptrend but displaying corrective behavior. There's a possibility of a larger correction before the uptrend is likely to resume.
As for USDCHF, it's trading in a corrective sideways pattern. While there's an underlying bullish trend, confirmation is needed to validate any potential continuation of the trend. Traders should closely monitor price action and key levels for confirmation of the next directional move.
EURUSD appears indecisive regarding its direction, likely influenced by conflicting signals from the moving averages; the 100 and 200 are rising, indicating a bullish trend in the mid to long term, while the 55 is declining, suggesting a bearish trend in the short- to medium term.
However, the recent crossover of the 100 moving average above the 200 moving average suggests that the bullish trend may eventually prevail over the short-term bearish trend.
EURUSD faced rejection at the 0.618 retracement of the January-February bearish move, at 1.0970. Currently, it is finding support at the 0.382 retracement of the February-March bullish move, at 1.0871.
The RSI is displaying positive sentiment, indicating that EURUSD is likely to resume its uptrend. However, the ongoing corrective move could potentially push EURUSD down to the 0.618 retracement level at 1.0804, where strong support is expected.
In such a scenario, a bounce should be anticipated. A close below 1.08 could further pressure EURUSD lower towards 1.0756.
GBPUSD faced resistance and lost its upward momentum just below the 1.29 level. The analysis of the weekly chart indicates that the 200-week Moving Average has provided significant resistance, halting further gains for the time being.
At present, GBPUSD is finding support at the 0.382 retracement level, situated around 1.2750. However, there is a potential for a correction down to the 0.618 retracement level at 1.2661.
The trends on both the daily and weekly charts are upward, as indicated by the ascending 100 and 200 Moving Averages.
Furthermore, the RSI indicators on both daily and weekly charts are showing positive sentiment, suggesting that GBPUSD may continue its upward trajectory.
Should GBPUSD resume its uptrend, it might face resistance once again near the 1.29 level previously tested. A daily close above the 0.786 retracement at 1.2909 could furhter push GBPUS higher to the 2023 peak around 1.3146
USDCHF is currently trading within a corrective sideways range, bounded by 0.8740 and 0.89. The short-term trend appears bullish, suggesting a potential continuation of the upward movement.
There's a likelihood of USDCHF bouncing from the lower boundary of the range at 0.8740 and testing the resistance level and 0.618 retracement at 0.89. A successful break above this resistance could signal a bullish move towards the 0.786 retracement level at 0.9047.
However, it's important to note that a close below the support level at 0.8740 would invalidate this bullish scenario and potentially reverse the trend. Traders should closely monitor price action around these key levels for confirmation of the anticipated trend continuation or reversal
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