On the daily chart below, we can see that the descending triangle got finally broken. The first key resistance now will be the 1.37 handle and if the buyers manage to break that, then the 1.40 handle will be the next target. The moving averages are clearly crossed to the upside supporting the bullish trend.
February was a good month for the USD as basically all the key economic data came out hot and made the market to revise upward its expectations on future interest rates path. The Bank of Canada, on the other hand, has paused its tightening cycle, so this divergence should support the USD going forward.
On the 4 hour chart below, we can see that the market has ranged for basically two months as the uncertainty regarding the path of interest rates and the economy didn’t give much conviction to the traders. In fact, we can see that even though the economic reports in February came out hot, the market kept on ranging.
This may be due to the fact that February data was based on the month of January and there are talks of seasonal factors skewing the data. What gave the market the momentum to break upwards were the US PMIs on February 21st as that report is based on the month of February and it basically confirmed that the economy may be truly holding up and the Fed has to do more.
On the 1 hour chart below, we can see that after the pullback yesterday, the price has broke up the counter-trendline and the moving averages have crossed again to the upside. This should be a signal that the buyers are again in control and we may see a push towards the 1.37 resistance next.
This week there will be the ISM PMIs that can act as fundamental catalysts. Since “good news is bad news” now, if the data beat expectations we should see the pair rallying, on the other hand, if the data miss expectations we may see another fall probably towards the 1.35 handle.
