The first week of June has seen positive gains return across the global markets, with the NASDAQ leading the way. The US Dollar Index (DXY), which had previously broken out of its range, headed lower and connected with 96.50. It currently appears to be in the process of pausing, with a brief retracement back up towards the 98.00 level a possibility this coming week.

The unemployment numbers from this first week were better than anticipated, posting as 13.3% for May, instead of closer to 20% as expected.

This weekend saw the 12th straight evening of largely peaceful protests, with more than 350 US cities, and more than 40 countries stepping up pressure for a change to aggressive policing policies.

US infections and deaths related to Covid-19 at the time of writing are 1.96 million and 111 000, respectively.

As we head into the first week of June 2020, key economic calendar news events to watch out for this week may be:

  • CPI, Core CPI – Wednesday.
  • FOMC (Federal Opening Market Committee) Statement and Economic projections – Wednesday.
  • Consumer sentiment – Friday.

Ahead of the trade ideas discussed below, it should be mentioned that as the US Indices are potentially over-extended, the risk of a move lower or increased volatility in the near-term is greater than in previous weeks. Precious metals show little or no technical trends, and Oil and Gasoline are also potentially over-extended.

US Dollar Index (DXY), Daily, Bearish

The DXY daily chart has a clear down-trend with lower-highs and lower-lows.

The moving averages (MAs) are in bearish angle, order and separation, with both momentum indicators heading lower supporting bearish sentiment.

Price has produced a bullish candle while over-extended, indicating that a retracement back up into the MAs is a possibility.

There is significant resistance at both 98.00 and 99.00, both of which overlap with Fibonacci levels 38.2% and 61.8% respectively.

The area highlighted in red is an area where a bearish entry signal may provide an opportunity to join the downtrend if it resumes.

Should a bearish rejection (or small indecision) candle form in this area, against 98.00 or 99.00 as resistance, an entry signal may be presenting itself.

Placing the entry just below this candle, with the stop-loss just above its high could be considered a reasonable entry technique, and if the stop-loss lies behind a significant level, it could provide additional technical protection.

Traders may consider taking partial profits at a 1:1 target to mitigate risk.

96.00 appears to be the next key level and may be a reasonable target for final profits.

Risk management will be key, so a stop-loss is imperative, in order to protect capital exposure against unforeseen outcomes.

USD Daily Chart

Euro futures, Daily, Bullish

The daily chart has broken out of consolidation to the upside and produced clear higher-lows and higher-highs.

Both momentum indicators are trending higher, supporting a bullish sentiment.

Price has produced a bearish candle and may soon be retracing back down to the MAs and create a bullish-indecisive candlestick as a possible entry signal.

The area highlighted in green shows more than one potential level where price could find support. Of interest is the 1.1130 level, which cleanly overlaps the 50% Fibonacci retracement level.

This area also sits between the MAs, which could be considered an area of equilibrium or a buy zone.

An entry above the high of this future candlestick may provide an entry into the next leg up if the trend resumes.

A stop-loss below the low of the candlestick may provide a tight exit and more aggressive reward-to-risk approach.

Should price during the next session break the low of the candlestick before breaking the high, the trade becomes invalidated.

Traders may consider taking partial profits at a 1:1 target to mitigate risk.

There is a strong inverse-correlation between the Euro and DXY charts, so it may be prudent to consider reducing exposure by either reducing account risk or choosing one of the two. Risk management will be key, so a stop-loss is imperative in order to protect capital exposure against unforeseen outcomes.

Euro FX Daily Chart

RJOF Editorial Team