The Dollar was trampled by most currencies on Wednesday as rising optimism around a quick economic recovery from the coronavirus pandemic boosted appetite for risk.
Safe-haven assets like the Japanese Yen and Gold fell out of favour while the Dollar Index (DXY) tumbled to its lowest level since early March below 97.40. As the market mood improves on recovery hopes, appetite for the Greenback may fall consequently dragging the DXY lower.
Focusing on the technicals, prices are under pressure on the daily charts as there have been consistently lower lows and lower highs. The Index is trading below the 20 Simple Moving Average while the Moving Average Convergence Divergence points to further downside. Sustained weakness below 97.80 may encourage a decline towards 96.25 and 95.00 in the medium to longer term.
Alternatively, a breakout back above 97.80 could trigger a rebound towards 98.50 and 99.00.
Euro rallies towards multi-month high
The Euro jumped to levels not seen in almost three months on hopes policymakers will offer a lifeline to the weakest economies in the Eurozone.
Expect the Euro to push higher in the short term, especially if the Dollar continues to weaken amid the risk-on mood. Looking at the charts, the EURUSD is bullish on the daily timeframe. The strong daily close above 1.1150 may open the doors towards 1.1280 and 1.1360, respectively.
Should prices sink back below 1.1150, the currency pair may target 1.1090.
GBPUSD breakout setup in play
A weakening Dollar has instilled Pound bulls with enough inspiration to break above 1.2500.
The question remains whether the upside momentum is strong enough for prices to break above the 1.2800 level.
Given how the Pound remains gripped by Brexit uncertainty and growth concerns, the fundamentals are not in favour of a stronger currency. However, a broadly weaker Dollar could create an opportunity for prices to push above 1.2800 and beyond.
Looking at the technical, the currency pair remains in a wide range on the daily charts. A strong daily close above 1.2650 may trigger a jump towards 1.2800. If this resistance level gives way, the next key point will be around 1.2900. On the other hand, a breakdown below 1.2500 could open a path back towards 1.2350.
EURJPY bulls are unstoppable….
The EURJPY has jumped over 250 pips since the start of this week thanks to an appreciating Euro and broadly weaker Japanese Yen.
Prices are heavily bullish on the daily charts with a solid breakout above 122.00 seen opening a path towards 122.90.
Commodity spotlight – Gold
As the market mood brightens on recovery hopes, buying sentiment towards safe-haven assets like Gold are set to fall. The precious metal could weaken towards $1680 if the $1710 level proves to be unreliable support. Alternatively, a rebound from $1710 is seen opening the doors back towards $1760.
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