USD/NOK Remains in Bear Flag; USD/CHF, USD/SEK Break Recent Uptrends

USD/NOK Remains in Bear Flag; USD/CHF, USD/SEK Break Recent Uptrends

US Greenback Outlook:

  • April is the worst month of the yr for the US Dollar (through the DXY Index) from a seasonal perspective, leaving it prone to weak point over the subsequent few weeks.
  • USD/CHF charges have been following US Treasury yields (much like USD/JPY), however USD/NOK and USD/SEK are performing like extra risk-on/risk-off pairs.
  • In line with the IG Client Sentiment Index, USD/CHF has a bearish bias.

Non-Main USD-crosses Look Bearish

You’ve heard it so much in latest days: we’re within the midst of the worst month of the year for the US Dollar. This level bears repeating as a result of seasonal tendencies like earnings repatriation in Japan or Sweden can have a profound impression on cross-border international change flows. The macro mixture of steady international bond yields, robust financial knowledge, and falling volatility speaks to a rising urge for food for danger. It’s in opposition to this backdrop that the seasonal tendency for US Greenback weak point is intriguing, as these are the situations that usually favor US Greenback weak point throughout regular (e.g. non-pandemic) occasions.

Though given much less consideration than their main European contemporaries, a trio of USD-pairs warrant dialogue (by the way, two of the three pairs are minor elements of the DXY Index). USD/CHF charges have been following US Treasury yields (much like USD/JPY), however USD/NOK and USD/SEK are performing like extra risk-on/risk-off pairs. If April is certainly the worst month of the yr for the US Dollar from a seasonal perspective, then it might stay prone to weak point over the subsequent few weeks through this trio of European currencies.

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USD/NOK RATE TECHNICAL ANALYSIS: WEEKLY CHART (Could 2014 to April 2021) (CHART 1)

USD/NOK Remains in Bear Flag; USD/CHF, USD/SEK Break Recent Uptrends

Having a look on the weekly timeframe, it seems that USD/NOK charges are within the midst of a bear flag consolidation in context of the previous transfer, which was a gradual decline from the March 2020 excessive. Concurrently, the bear flag consolidation is going on after USD/NOK dropped beneath the ascending trendline from the Could 2014 and March 2018 lows (which briefly held as help in August 2020 earlier than giving approach in November 2020).

Although momentum indicators have eased off their excessive bearish readings, there was no restoration in value motion – an indication that the market is digesting the transfer earlier than persevering with decrease. The most important signal of confidence USD/NOK charges would possibly supply {that a} bearish breakout is gathering tempo could be if the pair achieved a weekly shut 8.2453, the 61.8% Fibonacci retracement of the Could 2014 low/March 2020 excessive vary.

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USD/SEK RATE TECHNICAL ANALYSIS: DAILY CHART (October 2016 to April 2021) (CHART 2)

USD/NOK Remains in Bear Flag; USD/CHF, USD/SEK Break Recent Uptrends

USD/SEK charges have pulled again sharply over the previous two weeks, failing to return into the rising parallel channel drawn from the December 2016 and March 2020 highs once more the February 2018 and August 2020 lows. In failing to retake the channel in latest weeks, USD/SEK additionally misplaced its uptrend from the February and March 2021 swing lows. This additionally constitutes a failure beneath the 23.6% Fibonacci retracement of the 2020 excessive/2021 low vary at 8.6776, an indication that the rebound has misplaced its muster.

Momentum is popping bearish moderately shortly following the lack of the February and March uptrend. USD/SEK charges are beneath their every day 5-, 8-, 13-, and 21-EMA envelope, which is sort of aligned in bearish sequential order. Every day MACD is pulling again whereas above its sign line, whereas every day Gradual Stochastics are on the precipice of breaking beneath their median line. USD/SEK charges might quickly be heading again in the direction of the 50% Fibonacci retracement of the March 2014 low/March 2020 excessive at 8.3951.

USD/CHF RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to April 2021) (CHART 3)

USD/NOK Remains in Bear Flag; USD/CHF, USD/SEK Break Recent Uptrends

USD/CHF charges have turned the nook in a significant approach, dropping again from falling channel resistance at first of the month. Falling beneath a cluster of Fibonacci retracements measured from the 2019 excessive/2021 low vary and the 2020 excessive/2021 low vary. In doing so, important harm has been inflicted upon the momentum profile, which is shortly aligning in a bearish method. Whereas not in bearish sequential order, USD/CHF charges are beneath everything of their every day EMA envelope. Every day MACD’s drop is accelerating, even when it stays above its sign line. In the meantime, every day Gradual Stochastics have already dropped by way of their median line. A return again to 0.9200 could also be within the rapid future.

IG Consumer Sentiment Index: USD/CHF Charge Forecast (April 8, 2021) (Chart 4)

USD/NOK Remains in Bear Flag; USD/CHF, USD/SEK Break Recent Uptrends

USD/CHF: Retail dealer knowledge exhibits 69.43% of merchants are net-long with the ratio of merchants lengthy to brief at 2.27 to 1. The variety of merchants net-long is 6.05% greater than yesterday and 25.78% greater from final week, whereas the variety of merchants net-short is unchanged than yesterday and 21.09% decrease from final week.

We usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests USD/CHF costs might proceed to fall.

Merchants are additional net-long than yesterday and final week, and the mix of present sentiment and up to date modifications offers us a stronger USD/CHF-bearish contrarian buying and selling bias.

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— Written by Christopher Vecchio, CFA, Senior Forex Strategist

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