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USD benefits as missiles hit Poland

EURUSD chart 11 16

EURUSD lost some ground as missiles hitting Poland drove the dollar higher intraday. The sharp move lower intraday in the EUR and other risky assets was caused by two missiles hitting a Polish village and killing two people. According to President Biden, the missiles may not have been fired from Russia. This helped the EURUSD (and stock indices) to rally a bit. The buyers in EURUSD then stepped in above the key support level at 1.0275. The market remains in an uptrend above this level but the shooting star candle created yesterday in the daily chart could mean the market is losing momentum.

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The fact that the US dollar gains mean however that we should not take it for granted that the recent rally in the risky assets will continue. The shooting star candle formation in the daily chart decreases the probability of EURUSD hitting my upside target range of 1.0500 – 1.0520 but as long as the 1.0275 is defended today it’s still a possibility. A decisive break below the 1.0275 support would be likely to take the market to 1.0160 or so. As the Fed is expected to ease off with the aggressive rate hikes it seems likely that such a move would be seen as a buying opportunity.

Gold chart 11 16

Gold – I warned yesterday that the upside in gold could be getting limited. Now the market has formed a momentum loss candle (also known as a shooting star). Yesterday’s low is now a key. If the level is broken and there are sellers below it, then the risk of the market breaking below the 1753 level increases. On the other hand, a decisive rally above the 1786 high would probably move the market to 1800 or so.

DAX chart 11 16

DAX – The same loss of upside momentum shows up also Dax. We have now two shooting stars in the daily chart in Dax which raises questions of the bulls’ commitment to this market. Every market needs new inflows in order to trade higher. Such signs are now missing and instead, we have daily candles that signal uncertainty. So we have to question whether the rally is over for now. If we get a decisive break below yesterday’s low (14123) the market probably moves down to 13700 or so. Alternatively, a strong rally above yesterday’s high would open a way to the 14600 – 14700 range.

USDCAD chart 11 16

USDCAD missed my downside target by 5 pips and is now ranging between 1.3225 and 1.3335. The big picture hasn’t therefore changed. The market is trading near a significant support level but isn’t quite ready to rally yet. If the market breaks out of the range to the upside then my target is at 1.3380. If the lower end is broken decisively the market probably drifts to 1.3150.

USOIL chart 11 16

USOIL – I said yesterday that a decisive break above 85.20 would be bullish and open a way to 87.50 or so. The market rallied to 88.06. The move provided a nice opportunity on the long side. Now the market has returned to the 85.20 level. If buyers defend levels above yesterday’s low (83.53) we probably see another attempt to take the market to 88 but all in all, USOIL is in a range and just bounces back and forth without a clear direction. If 83.53 is violated decisively, look for a move to 82.40 or so.

 The Next Main Risk Events

  • USD Retail Sales
  • USD FOMC Member Bullard Speaks
  • USD Philly Fed Manufacturing Index
  • USD Unemployment Claims
  • USD FOMC Member Mester Speaks
  • USD Existing Home Sales

For more information and details see the TIOmarkets economic calendar here

Trade Safe!

Janne Muta
Chief Market Analyst

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