USD Oversold Weekly for First Time Since 2018

It's been a painful first two months of Q3 for the US Dollar. Bears started the push shortly after the July open, and with USD/JPY carry unwind starting shortly after, there's been a constant and near-continuous push from sellers.

At this point, the USD finished last week with RSI in oversold territory for the first time since January of 2018. That episode marked a significant low but notice that the reversal didn't happen quickly then, as RSI is not great as a timing indicator. It can be helpful for context, however, highlighting a one-sided market and this is something that could be of interest in the not-too-distant future, especially for those looking at bearish themes in EUR/USD at some point.

For now, carry unwind remains an issue and with Powell's proclamation of a pivot at Jackson Hole on Friday, holding long carry in USD/JPY hasn't been this unattractive since before the Fed started hiking rates in March of 2022.

For this week, the item of interest is possible capitulation in EUR/USD, which could show with an extended upper wick after a failed run at fresh highs. For levels - the 1.1275 Fibonacci level in EUR/USD remains of interest as this helped to hold the highs last year.

- js