G10 currencies extended higher again along with Global benchmark indices on March 25. The recent bounce in FX, commodities, and risk assets was led by a better risk-reward ratio and the power of a short-covering.

G10 scoreboard: Among the G10 block, Norway Krone surged over 12%, whereas the Japanese Yen lost more than 10%. Among majors, AUDUSD and GBPUSD managed to hold the critical support levels and rallied strongly on the back of dollar underperformance after a big rally.

Commodities: Powered by short-covering and better risk-reward. Palladium prices jumped more than 57% from the recent lows. Yesterday alone it rallied 25%. The Yellow metal traced out a double bottom at $1445 and rallied to $1639. Now it is facing stiff resistance $1642. In energy space, Brent oil price was traced out a double bottom at $27 on a closing basis (Weekly basis). Maybe this a temporary pause in the near term, and we still expect lower oil prices of $20-$17 levels in 2Q 2020.

What’sWhat’s next? The recent market action suggests the market across the board has hit the near bottom.

  • Andrew Sheets at Morgan Stanley said, “Although the sell-off may not be over and the global economy has tough days ahead, a growing number of factors suggest that risk/reward in markets may be getting better.”

Key support and resistance level

Dow Jones (KTM: US30): It seems Dow jones has stabilized above the 20,000 with a multi-support placed at 20,390. If the index moves further higher, watch out for 22,850 and 23,100. The 38.2 fibs seem at 22570. A daily close above 21460 could allow the benchmark index to bounce further.

Dollar index (KTM: USDX): According to the daily candlesticks chart, the key support level is placed at 100.60, and 100 below here 99.50 exists. Flipside, if the index moves upward, key resistance levels to watch out are 102.00, and 102.40 above here 103.80 exists. A move above the recent high would print 105.40 and 107.15 levels.

EURUSD: On the hourly chart, the key resistance level is placed at 1.0900 above here 1.0925 exists. A daily close above these could invite 1.0980-1.1000 levels. Supports located at 1.0850 and 1.0800. Below here, wait for 1.0750.

USDJPY: Potential resistance zone spread between 112.25-112.40. As long as this is resistance, wait for a pullback to 109.70 and 109.30. At the monthly chart, the price traced out a double bottom between 101.80-99.60. As long as this zone offers support, we expect the price would eventually through the higher end of the trendline with 115.00 and 118.00 as targets. To strengthen this view, the price has to close above the said resistance zone, either Weekly or Monthly.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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