USD Races for Safe Haven Tag with JPY Once Again, While AUD Continues the Momentum

  • May 04, 2020 01:47 AM AEST
  • Team Kalkine
USD Races for Safe Haven Tag with JPY Once Again, While AUD Continues the Momentum

The United States dollar is trading under pressure with the dollar index again retracing back from its recent peak of 100.87 (intraday high on 24 April 2020) to the present low of 98.64 (intraday low on 1 May 2020), which marked a fall of ~ 2.21 per cent.

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The economic figures across the United States seem to be recovering slightly; however, the higher liquidation by the United States federal reserve is keeping the dollar under check.

To Know More, Do Read: Beleaguered Economy Yet Strong Currency, USD Poised to Embrace the Projected Deflation?

Post scaling recent peak, the dollar index faced resistance around the long-term hurdle of 100.25-101.0 and retraced back, which is now supporting the cross currencies such as AUD and JPY. Apart from the decline in the U.S. dollar, the improvement across the domestic front is also supporting the home currency, which has given a consistent rally from USD 0.5507 (intraday low on 19 March 2020) to the present high of 0.6571 64 (intraday high on 30 April 2020), which underpinned a price appreciation of ~ 19.32 per cent.

To Know More, Do Read: RBA Rate Cut and Morrison Government Stimulus Uplifts Home Currency, Downtrend to Linger?

Let us now look at currencies, which are showing some momentum and interesting development in the wake of falling U.S. dollar.

USDJPY On Charts

  • USDJPY on the Monthly Chart

USDJPY Monthly Chart (Source: Refinitiv Thomson Reuters)

On the monthly chart, the currency has retracted ~ 50.0 per cent of the recent upside primary rally, but the price took the support of the long-term horizontal trendline (green line) and rose again. The horizontal trendline would now act as the immediate support for the currency.

The major support is at JPY 101.56, below which JPY would gain further strength, the cross pair remained in uptrend largely due to the rise in DXY. Also, the 14-period average true range is losing steam around the lower levels and near the short-term support of 38.2 per cent retracement level, suggesting that JPY might again lose steam against USD over the long-run; however, there are many resistance levels before a clear continuation of the existing trend could take place.

USDJPY Monthly Chart (Source: Refinitiv Thomson Reuters)

However, on further investigating the monthly chart, it could be seen that the cross pair is showing a negative crossover between the medium-term and short-term exponential moving average of 50- and 21 months, with a negative signal from the MACD or moving average convergence and divergence indicator, reflecting that USD could go further weak against JPY ahead.

The price pattern is following a symmetrical triangle, which reflects the ongoing tug-of-war between USD and JPY for the title of the safe haven in the currency market.

  • USDJPY on a Weekly Chart

USDJPY Weekly Chart (Source: Refinitiv Thomson Reuters)

On the weekly chart, the pair is trading below Span A, which represents the mean value of the conversion line (pink) and the base line (blue) and is below Span B or the mean value of 52-week high and low, suggesting that the prevailing trend is a downtrend.

The conversion line, which represents the mean value of 9-week high and low is showing a negative cross with the base line, which represents the mean value of 26-week high and low, which coupled with a below mean 14-week Relative Strength Index suggests that the bears could dominate the cross pair, which would be bearish for USD and bullish for JPY.

However, the spread between Span A and Span B is quite narrow, suggesting that USD could again regain momentum without major difficulty, but for confirmation, the cross pair has to breach and sustain above the red cloud area.

  • USDJPY on a Daily Chart

USDJPY Daily Chart (Source: Refinitiv Thomson Reuters)

On the daily chart, the cross pair it could be seen that the pair is trading near the bottom line of the descending triangle formation with a negative crossover from MACD. A break and sustain below the same triangle formation could further establish a bull run in JPY and a bear run in USD, and failure to do so would have a reverse impact.

AUDUSD On Charts

  • AUDUSD on a Monthly Chart

AUDUSD Monthly Chart (Source: Refinitiv Thomson Reuters)

It could be seen on the monthly chart, that the currency plunged briefly recently, and penetrated its long-term support of USD 0.6039; however, bulls reacted quickly to the fall and the currency recovered with a bull cover candle in April 2020.

The long-term exponential moving averages of 50-month and 21-month are showing a negative cross with a large spread, suggesting that the downtrend is yet strong.

  • AUDUSD on a Weekly Chart

AUDUSD Weekly Chart (Source: Refinitiv Thomson Reuters)

On the weekly chart, the home currency is trading below Span A, which itself is trading below Span B to confirm the strength of the current down strength. Also, the conversion line and the base line are showing a negative cross below Span A, which coupled with a below mean 14-week RSI is reflecting that bears are in strength in the status quo.

Now, the grey cloud would be the primary resistance for the currency.

  • AUDUSD on a Daily Chart

AUDUSD Daily Chart (Source: Refinitiv Thomson Reuters)

The daily chart is now turning slightly positive with price trading above 50-day and 21-day exponential moving average, which would now act as the short-term support for the currency. The moving averages are yet to give a positive crossover; however, if the currency crosses its present high, it will increase the short-term trailing average of 21-days to establish a positive crossover with 50-day EMA.

On projecting the Fibonacci Fan by connecting the recent low to the recent high, the short-term support of the fan is coming at ~ USD 0.6370 mark, which happens to be the level of the 50-day exponential moving average, and it should be closely monitored as a break and sustain below the 3/3 fraction would mark the continuation of the primary downtrend, while if the price remains able to sustain the rally it could rise to test its long-term resistance at USD 0.7984, as depicted on the monthly chart.

 

 


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