The Danish Krone has been trading higher against the mighty U.S dollar for the past three months. After securing a record high at 0.1613, the bulls are showing signs of exhaustion. The recent break of the short term bullish trend line support at 0.1584, has refueled the bears. However, the break was not accompanied by a sharp fall as the price bounced off from the minor support level at 0.1570. This level is also marked by the 38.2% Fibonacci retracement level drawn from the low 19th June 2020 to the high of 1st September 2020. But the bounce is considered as a part of the bullish correction and long term investors are expecting a strong bearish movement in the asset.
Before the bears start dominating the DKKUSD pair, we might see a retest of the broken trend line resistance level at 0.1592. From that level, any bearish price action confirmation signal will be an excellent opportunity to take the short trade. But investors are requested to look for the bearish price action signal before taking any short in the DKKUSD pair. If the bears manage to take control of this market, the initial target for this pair would be the support level at 0.1560. A daily closing of the price below the 50% retracement level might lead this pair towards the 61.8% retracement level at 0.1543. This level is going to play a major role. A clear break of this important support level might bring back the long term bearish trend again into the main game.
If the recent rebound in the price from the 0.1570 level manages to break above the resistance level at 0.1592, we can assume the break of the bearish trend line was a false positive. The deeper falls in the DKKUSD price would be considered as an aggressive bearish movement to hunt down the stop loss. But if the price manages to break above the 0.1592 level, we might see another retest of the high at 0.1614. Breaking above that level might be a tough task for the bulls since we have plenty of resistance candle right at that level in the higher time frame. But a clear break of the price above that level might bring back the optimistic bulls in the Forex market causing a strong rally in the DKKUSD pair.
Considering the fundamental issue, The U.S economy is not doing well compared to the Danish Krone. Moreover, the upcoming U.S election is imposing a great threat to political stability. Things have been furthermore intensified as U.S stills struggle hard to bump up their economy is most of the major sector due to the coronavirus outbreak. However, investors are expecting a strong turnaround from the might green bucks before the U.S election and this might cause the DKKUSD to fall. On the contrary, the Danish economy is still in the recovery phase as the global economy collapsed due to the ongoing Covid -19 pandemic. Comparing both economies, the bears have still the upper hand in the global market.
Considering the technical and fundamental factors, the DKKUSD pair is most likely to enter into a deep bearish correction phase after hitting an important resistance level. But traders are advised to carefully invest their money as too many fundamental variables are affecting the U.S economy at the current market condition.