Dollar Declines: How Deep Could the Correction Be?

FXOpen -

By the end of last week, the American currency traded rather mixed:

  • The USD/JPY currency pair strengthened by more than 200 pips and almost tested the significant resistance level at 160.00.
  • The USD/CAD pair failed to break out of the medium-term flat corridor of 1.3740-1.3620.
  • Sellers of the pound in the GBP/USD pair tried to push through the support at 1.2620-1.2600 but were unsuccessful.

However, despite recent successes, the upward momentum of dollar bulls began to slow down yesterday. In some directions, we observe a slowdown in the growth of the USD, and in some, reversal patterns have already formed.

USD/CAD

Last week, the range of 1.3740-1.3720 became a barrier to the resumption of growth in the USD/CAD pair. According to the technical analysis of USD/CAD, we observe the execution of the bearish pattern "shooting star" from 11 June. The nearest range where the price may fall within the execution of this pattern is 1.3600-1.3580. A resumption of the upward movement is possible after a confident strengthening above 1.3740. Events that could affect the pair's price formation include:

  • Today at 14:00 (GMT +3:00), a speech by Michelle Bowman, a member of the US Federal Open Market Committee (FOMC).
  • Today at 15:30 (GMT +3:00), the release of Canada's core consumer price index (CPI) for May.
  • Today at 17:00 (GMT +3:00), the release of the US CB consumer confidence index for June.

Read analytical USD/CAD price forecasts for 2024 and beyond.

USD/JPY

As expected, the USD/JPY pair managed to get as close as possible to 160.00, with yesterday's high recorded at 159.92. It failed to update April's high of the current year, and the price sharply bounced back from 159.92, losing over 100 pips in just a few hours.

According to the technical analysis of USD/JPY, a downward correction is possible in the coming trading sessions, as the "hanging man" pattern has formed on the daily timeframe. The execution of this pattern may contribute to a price decline towards recent lows at 158.20-157.70. A move and consolidation above 160.20 may lead to exponential growth of the pair towards historical highs.