Dollar slightly firmer in a tense start to the week

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With so much still to come, it would be unwise to start picking sides and gambling your money away at this point. And that is pretty much the same kind of feeling across broader markets as traders and investors will have to do more waiting until we get to the key economic releases on the week.

The dollar is slightly firmer today, after having gave back its post-PPI gains on Friday, as there the tension continues to linger. Here’s a look at some of the key levels to watch for dollar pairs this week.

EUR/USD is still holding above its 200-day moving average (blue line) and that keeps buyers interested in search of a further push higher. However, the key trendline resistance from the swing lower since January 2021, seen close to 1.0600 now, is still providing a key area for sellers to lean on in keeping the upside more limited – for now at least.

In somewhat similar fashion, GBP/USD is also holding above its own 200-day moving average (blue line) and that is keeping buyers poised in search of a further upside leg. However, gains in the past week have been limited by the August highs at 1.2276-93 and that will remain a critical resistance point before the 1.2500 mark.

In the event we see a break back below the 200-day moving average, that will put 1.2000 in the crosshairs as sellers start to regain some momentum.

With so much central bank focus this week and the Fed also to provide the latest projections for its infamous dot plots, the bond market will be a major focus point. As such, USD/JPY will be an important pair to keep an eye on.

The recent retreat in bond yields have seen the pair sharply correct back towards its 200-day moving average (blue line). While sellers tried and tested levels below the key level, we have since seen a slight bounce but there is still plenty at stake with price action resting between that and its 100-day moving average (red line) above 140.00 at the moment.

That sort of ping pong range makes for a tricky look and feel and the next directional move will come from a break on either side.

As oil prices are tanking, that has also put the loonie under pressure as of late. The somewhat dovish rate hike by the BOC also didn’t help and that has seen USD/CAD strongly reject its 100-day moving average (red line) since November to push back towards 1.3700 now.

The figure level is seeing some resistance from sellers but ultimately, it will be the key risk events this week that will provide the catalyst for any potential push back towards the highs for the year. Otherwise, this may be where we see a turning point with sellers looking for another trip back to the downside – though the move has to be weighted against oil market sentiment as well.

Amid the more choppy market sentiment in the past two weeks, AUD/USD is looking rather unsettled but the retreat last week saw a bounce off its 100-day moving average (red line) and that is keeping buyers in the game for now.

In the bigger picture, price action is holding within that ping pong range of its 100-day moving average and 200-day moving average (blue line). As such, the next meaningful directional push is likely to come from a break on either side with topside direction looking towards 0.7000 and downside to try for a test of its 21 November low at 0.6585 before a look at 0.6500 next.

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