The dollar faced significant resistance at 105.04 and the 50-day SMA at 104.98, resulting in a lower finish on Friday. Looking ahead, the 200-day SMA at 104.39 serves as a logical downside support target, with a break potentially leading to support at 103.62. The Relative Strength Index (RSI) failed to move above the 50.00 centreline last week, hinting at ongoing bearish momentum. The daily chart also shows signs of a developing downtrend, with Friday’s reaction suggesting that dollar bears may continue to dominate until the 200-day SMA is tested.
On the H1 chart, short-term action was confined between ascending support at 104.39 and trendline support-turned resistance at 104.08. Resistance levels to watch include 104.84 and 105.04, while potential downside targets may be found near the 200-day SMA. With limited support on the monthly chart and a bearish bias on both the daily and H1 timeframes, sellers are in control for now. Price action on the H1 chart could further confirm this sentiment by defending breached trendline support and pushing towards the Fibonacci cluster at 104.47.
Should current trendline resistance break, sellers might aim for H1 resistance at 104.80 in the upcoming week. However, the overall tone remains bearish, with the potential for further downside moves as key support levels are tested. Market participants should closely monitor price action on both the daily and H1 timeframes for further confirmation of the bearish trend and potential entry points for short positions.
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