The forex market made significant moves on Tuesday, but will they hold through Thursday’s PMI line-up?
Watch today’s video for the key levels to monitor and potential scenarios to trade. I’m sharing my complete DXY, EURUSD, GBPUSD, and USDCHF trading plan.
US Dollar Index (DXY) Analysis
The DXY broke below the 100.20 handle on Tuesday, sparking fresh sell orders. In recent weeks, I’ve discussed this level a few times as the one to watch.
For over a week, the DXY was at a stalemate between 100.20 and 101.80. The descending channel resistance was also near 101.00.
However, the market has decided, at least for now. Tuesday’s close below 100.20 flips the level to new resistance on a daily closing basis.
One unsettling factor is that the US Dollar Index closed last week above 100.20. So, 100.20 is daily resistance but also weekly support.
That’s especially unsettling given Thursday’s line-up of Purchasing Managers’ Index (PMI) figures from the US and across Europe. Those numbers will either support the Tuesday DXY breakdown or push the dollar higher to support the weekly chart.
I can make either case, but 100.20 is currently resistance with support in the 99.00 region, followed by 97.70.
EURUSD Analysis
EURUSD managed a 1.1275 reclaim on Tuesday. However, given the 1.1284 daily close, it wasn’t the most convincing break.
The euro also has to navigate Thursday’s PMI figures. Those numbers will undoubtedly introduce volatility, with 1.1275 being the level to watch.
Like the DXY, EURUSD is at a crossroads. On the one hand, the pair has flipped 1.1200 and 1.1275 back to support. On the other hand, EURUSD closed last week below both levels.
Thursday’s PMI line-up will likely decide which side wins. However, based on the daily chart alone, the EURUSD could target the 1.1500 region while trading above 1.1275.
GBPUSD Analysis
Last week, I discussed a potential GBPUSD bull flag pattern. The pair broke resistance on Monday and retested the level as new support on Tuesday.
Buyers pushed the pound even higher on Wednesday but are struggling at 1.3440 resistance. It’s a significant level from last September that isn’t going down without a fight.
Despite breaking channel resistance on Monday, GBPUSD remains range-bound. This is important to remember, as there are always multiple perspectives on a market.
On one hand, the GBPUSD uptrend is alive and well. On the other hand, buyers are struggling at a multi-month resistance level, and the pair has traded sideways since late April.
Patience is always necessary, but it’s even more critical during times like these. Trading against the uptrend without a clear signal is ill-advised, but so is buying into key resistance.
If GBPUSD can clear 1.3440 on the high time frames, it will open the door to 1.3630 and 1.3750. And if 1.3300 fails, GBPUSD could pull back to 1.3200 or lower.
USDCHF Analysis
USDCHF broke key support on Tuesday, exposing the 0.8200 lows. The pair tested that area on Wednesday, and so far, buyers are defending it.
I discussed this pair on Tuesday, noting the indecision between 0.8300 and 0.8350. It was a waiting game to determine whether buyers or sellers would win. So far, sellers are in the driver’s seat.
Ideally, I would have liked to see USDCHF break higher. The high-time-frame imbalances in the 0.8700 region would make excellent targets. Plus, the risk-to-reward ratio is more favorable.
However, “ideal” does not equal “likely.” USDCHF must break back above 0.8330 on the high time frames for a rally to become likely. As of this writing, the chart isn’t giving me any feedback to indicate that’s likely.
Tuesday’s breakdown puts USDCHF in a new range between 0.8200 and 0.8330. As mentioned above, Thursday’s PMI figures will shake things up for the pair, so be prepared for anything.
