GBPUSD & DXY Forex Update: Key Triggers and Market Insights📅 Today, we're diving into the Forex market, specifically analyzing the GBPUSD pair. Previously, we examined this pair on the weekly time frame, and now I’ll provide an update with new entry points marked on the chart.
🔄 Weekly Time Frame Analysis
In our previous analysis, we identified 1.28019 as the first long trigger on the weekly chart. The price has since stabilized above this level and even activated the 59.01 trigger on the RSI. As mentioned before, the next target is 1.31921, and with a 230-pip distance, this level can offer a significant profit to those who entered long positions following the breakout.
🧲 Curved Trend Line
We also have a curved trend line in this area, which can inject substantial momentum into the market and push the price upwards. If this trend line breaks, we can expect a trend reversal and a potential downward move.
📊 Trend Health Check
Checking the health of the trend, we notice that each successive bullish wave has weakened while the red candles remain powerful. However, the RSI shows no signs of trend weakness or divergence, and the price has managed to create a higher high. Thus, despite the weakened upward trend, the price has managed to start a robust new trend and cover its previous weaknesses.
📈 Target and Rest Period
Upon reaching 1.31921, the price will likely take a rest before creating new market structures, allowing us to find new triggers for decisions. If this area breaks, the next target on the weekly chart is 1.36736.
📉 Bearish Scenario
If the price reverses the entire recent upward move and breaks the curved trend line, activating the 1.26262 trigger, we can expect a downward movement. The main trigger is 1.23585, with targets at 1.20909 and 1.18253.
📅 Daily Time Frame Analysis
Let's examine the daily time frame to observe price behavior in more detail. After multiple tests of the 1.28019 resistance, the price finally stabilized above it, driven significantly by the recent US CPI news which weakened the US dollar, causing pairs against the dollar to rise.
📰 US CPI Impact
The US CPI report showed a decrease in inflation, causing the DXY to drop. Lower inflation reduces investment appeal in the country, leading to a weaker currency. As the dollar weakens, pairs like GBPUSD rise.
💣 RSI and Momentum
The RSI has entered the overbought (OB) zone, indicating strong bullish momentum in the market. The price hasn't taken a break, showing only one red candle in the last 12 and forming no structures for a clear trigger.
🎈 SMA99
As previously mentioned, the SMA99 acts like a black hole, pulling prices towards it if they move too far away. Currently, the price isn't too far from the SMA99, suggesting more upward movement potential. However, if it moves too far, the SMA99's "black hole" effect could come into play.
📈 Long Position Strategy
For a long position in this time frame, we should wait for the price to form a new structure. We could also look at lower time frames like 4-hour or 1-hour charts to find suitable long triggers. In this time frame, patience is key before opening a long position.
📉 Short Position Strategy
The short position trigger remains the same as on the weekly chart. We need to wait for the curved trend line to break and activate the 1.26262 or 1.23585 triggers.
🔍 DXY Chart Analysis
The DXY chart on the daily time frame shows a large ascending triangle, with a previous false breakout and a move back up from the 100.883 support. The recent upward move failed to reach the 107.017 resistance and turned back from 106.338, a strong supply area making it difficult for the price to stabilize above this range.
🔫 Short-Term DXY View
On a smaller scale, the DXY has a ranging box between 104.039 and 106.338. The recent upward move couldn’t reach the box ceiling, and with the main ceiling at 107.017, this confirms significant upward trend weakness.
🪓 RSI Confirmation
A drop below 38.71 in the RSI confirms the entry of bearish momentum into the market. If the price breaks the ascending trend line and stabilizes below 104.039, downward momentum will drive the market.
📰 Fundamental Weakness in USD
As highlighted in the GBPUSD analysis, the USD is weakening fundamentally, adding another layer of confirmation for a potential DXY decline.
🎯 DXY Targets
The initial target for a DXY drop is 102.688, with a second target at 100.883. Upon reaching these targets, the price will likely range for an extended period, forming a new structure for either a drop or a rise.
🧠💼 Always remember that trading futures involves inherent risks, and improper risk management can lead to margin calls. Stick to your capital management principles and use stop-loss orders, aiming for an initial risk-to-reward ratio of 2.
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