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Latest forex trading signals and weekly technical analysis: DXY; EUR/USD; USD/JPY; USD/CHF

By Piero Cingari

09:15, 9 September 2022

Chart of a US dollar banknote on the background of a falling chart
US dollar on the background of a falling chart – Photo: Shutterstock

The dollar index (DXY) is about to end the week in the red (-1%), after reaching its highest peaks in the last twenty years and growing by 15% since the beginning of the year, marking its best yearly performance since 1981.

Except for the Japanese yen (JPY), all major G-10 currencies have gained ground against the US dollar in the last week, though they are still negative over the past month.

As of September 9 (10:30 London), the Swedish Krona (SEK) was the best weekly performer (+2.5% against the USD), followed by the Swiss Franc (CHF) (+2.2%) and the Norwegian Krone (NOK) (+1.5%).

The euro (EUR) and the British pound (GBP) both marginally rose this week, by 1.4% and 1.1%, respectively, though their year-to-date performances remain deeply in negative territory.

At both a weekly and monthly scale, the Japanese yen (JPY) has been the worst performing major currency. The JPY has depreciated by 19% year to date against the US dollar.

Forex market: Performance of major currencies (vs USD) as of September 9, 2022

Performance of major FX currencies as of September 9, 2022 – Photo: Capital.com

This week's most important forex market events were:

  • Reserve Bank of Australia (RBA) interest rate decision: 50 basis point hike to 2.35% as expected.
  • US ISM Services PMI for August: 56.9 from 56.7, above expectations (55.1).
  • Bank of Canada (BoC) interest rate decision: 75-basis-point hike to 3.25% as expected.
  • European Central Bank (ECB) interest rate decision: 75-basis-point hike to 0.75% (see the latest analysis on the ECB meeting and EUR/USD reactions).

The key market-moving events of the coming week will be:

  • Tuesday September 13: Germany ZEW Economic Sentiment Index for September (-59.5 expected) and US inflation rate for August (8.5% expected).
  • Wednesday September 14: UK inflation rate for August (10.4% expected).
  • Thursday September 15: Bank of England (BoE) interest rate decision and US retail sales for August.
  • Friday September 16: US Michigan Consumer Sentiment for September.

Now, let's check out the most recent forex chart patterns and signals emerging from the technical analysis.

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US dollar index (DXY) technical analysis: weak short-term momentum, but bulls remain in control

US dollar index (DXY) technical analysis as of September 9, 2022 – Photo: Capital.com, Source: Tradingview

As indicated in the preceding forex analysis of the US dollar index (DXY), there were extremely stretched levels in the DXY that could have enabled some profit-taking behaviour by bulls. 

The pullback was triggered by a break of the support at 109.3, which caused the DXY to fall towards the current 108.2, where it is now testing the end-August support. 

The daily RSI and the MACD both provide us with interesting technical signals. Following the prices reaching new relative highs (110.1), but the oscillators failing to do so, both indicators show a bearish divergence.

The RSI began to fall after briefly entering overbought territory, while the MACD formed a bearish crossover.

There may be some short-term weakness in the dollar's momentum, but key support is located at 107.1 (78.6% Fibonacci level 2022 high-low & 50-day moving average), where we might expect some buying pressure to come back. 

EUR/USD technical analysis: testing 50-dma with bullish divergences

EUR/USD technical analysis as of September 9, 2022 – Photo: Capital.com, Source: Tradingview

The euro (EUR/USD) is testing a key dynamic resistance represented by the 50-dma, after surging slightly above the psychological parity level with the dollar.

USD/JPY

156.53 Price
+0.210% 1D Chg, %
Long position overnight fee 0.0108%
Short position overnight fee -0.0190%
Overnight fee time 21:00 (UTC)
Spread 0.010

AUD/USD

0.66 Price
-0.320% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0010%
Overnight fee time 21:00 (UTC)
Spread 0.00006

EUR/USD

1.08 Price
-0.160% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0002%
Overnight fee time 21:00 (UTC)
Spread 0.00006

GBP/USD

1.27 Price
+0.130% 1D Chg, %
Long position overnight fee -0.0046%
Short position overnight fee -0.0036%
Overnight fee time 21:00 (UTC)
Spread 0.00013

RSI and MACD signals are also visible here – RSI, MACD bullish divergence and bullish MACD crossover – which are obviously the opposite of those seen in the DXY chart.

Breaking through the 50-dma resistance is a significant hurdle for EUR/USD as the 2022 bearish trendline is just close by. When the pair approached these resistance levels in the past, it has always been subjected to intense selling pressure.

On the other hand, bullish divergences in momentum oscillators, if confirmed by a price action above the bearish trendline at 1.017, may indicate that the most recent leg of the depreciation is losing some steam and that we could witness brief respite after the storm. 

From a fundamental standpoint, the euro remains mired in weakness in the medium term, due to Eurozone's worsening macro fundamentals in comparison to those of the United States, as explained here. 

USD/JPY technical analysis: bear trap in sight?  

USD/JPY technical analysis as of September 9, 2022 – Photo: Capital.com, Source: Tradingview

The dollar-yen pair (USD/JPY) is having its worst session in a month, falling 1.6% on the day, at the time of writing

Extreme overbought conditions have sent the RSI plunging, and the MACD line is also beginning to decline from very high levels. 

The psychological support level of 140 may be tested next by the USD/JPY price action.

The technical picture, on the other hand, remains predominantly bullish. Even if 140 were to be broke, USD/JPY could then face strong support at 138.1 (78.6% of the Fibonacci high-low for 2022), where the buying pressure would likely resume. 

USD/CHF technical analysis: Three black crows invalidate the head-and-shoulders bottom pattern

USD/CHF technical analysis as of September 9, 2022 – Photo: Capital.com, Source: Tradingview

The dollar-franc pair (USD/CHF) is recording its third straight day of losses, and is about to form a "three black crows" pattern, which is characterized by three consecutive bearish red candlesticks with lower highs and lower lows. 

A three black crows pattern typically indicates a bull trend reversal and a shift in trader sentiment. This technical pattern on USD/CHF also invalidates the false bullish signal that had been given by the formation of a head and shoulder bottom earlier this month. 

MACD also shows a bearish crossover. The last time it happened in July the pair extended the downside movement. 

USD/CHF is now testing the lows of August 19 and the next support is given by the psychological level of 0.95 which also corresponds to August 18's lows.

Fibonacci retracement between August 11 lows and September 6 highs has already exceeded 50% and stands at 38.2%.

Below the 0.95 mark, next supports are given by 0.9491 (23.6% Fibonacci) and then by 0.9372 which would then complete the retracement to July lows. 

Markets in this article

EUR/USD
EUR/USD
1.08337 USD
-0.00177 -0.160%
GBP/USD
GBP/USD
1.27252 USD
0.00167 +0.130%
DXY
US Dollar Index
104.456 USD
0.161 +0.150%
USD/CHF
USD/CHF
0.91453 USD
0.0034 +0.370%
USD/JPY
USD/JPY
156.531 USD
0.327 +0.210%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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