US Dollar, GBP/USD, EUR/USD Talking Points:
– The big item on today’s economic calendar has already taken place with this morning’s ‘Super Thursday’ rate decision at the Bank of England. The BoE cut growth forecasts as Mr. Mark Carney noted that the ‘Fog of Brexit’ is creating tension and the UK economy is ill-prepared for a No-Deal scenario. He did note, however, that clarity on Brexit could bring on upside, but at this point, that seems to be the lower-probability scenario.
– The US Dollar topside rally has finally run into an element of resistance as taken from the monthly highs in the currency. This shows around 96.66, and since coming into play a couple of hours ago, prices have started to pull back. This pullback may need a bit more room, however, as prices had become very overbought on a short-term basis.
– DailyFX Forecasts have been published for Q1, 2019 on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.
US Dollar Rally Runs into Resistance at Monthly Highs
The week-long rally in the US Dollar has continued, and the currency is now trading above two resistance levels of note; testing above both the trend-line projection and the 96.47 Fibonacci level. This move has had reverberations through many FX pairs, with bearish themes showing more prominently in pairs like EUR/USD, GBP/USD, AUD/USD and NZD/USD.
The big question around the US Dollar at this point is for how long might bulls be able to push? A bit of resistance has started to show off of the late-January swing-high of 96.66, and a bit-higher on the chart is another area of interest around 97.00. Inside of recent price action, that 96.47 level could be of interest for support themes; but given the deep overbought nature of RSI on shorter-term charts, prices may pose a deeper retracement before that bullish trend is ready to resume, and this can keep interest around the 96.30 and 96.04 levels for deeper zones of potential support.
US Dollar Four-Hour Price Chart: Overbought USD Pulls Back from Monthly Highs
Chart prepared by James Stanley
GBP/USD Dips then Bounces on BoE
Going along with that Dollar-strength over the past week has been a reemergence of sellers in Cable. GBP/USD topped out around the 1.3200 level in late-January, and since then sellers have been getting more aggressive, posing two key support breaks so far this week. The 1.3000 level was taken-out on Monday, and after building in a day of support at the 1.2920 Fibonacci level, prices have sunk down to test the next potential zone that I looked at in yesterday’s article, spanning 1.2828-1.2850.
This morning’s drivers in GBP are emanating from the first ‘Super Thursday’ rate decision of 2019. The Bank of England cut growth forecasts, and Mr. Mark Carney noted that the ‘Fog of Brexit’ is creating tension and the British economy is not properly prepared for a No-Deal Brexit, which is looking increasingly likely with Brexit-day now just seven weeks away. This brought in an initial move of weakness that drove prices down towards that 1.2850 support. Mr. Carney did also note, however, later in his speech that clarity on Brexit could bring on upside, which did appear to help soften the blow to a degree as buyers returned to push prices back above 1.2920.
In GBP/USD, prices remain above the 50% marker of the January bullish run, and RSI is in deep oversold territory, approaching the 20.0 value on the four-hour chart. But it may take a bit more than that to bring bulls back into the picture on a longer-term basis. For those looking at short-side strategies, resistance potential exists around that former area of support around the 1.3000 area, which currently syncs fairly-well with the bearish trend-line taken from swing-highs over the past week.
GBP/USD Two-Hour Price Chart
Chart prepared by James Stanley
EUR/USD Bearish Short-Term Trend Continues
I had looked at this one in Tuesday’s webinar, remarking that the short-term trend that’s shown with prominence recently is in the midst of a longer-term range that’s now been in-effect for more than three months. With prices making a fast approach towards longer-term support of that range, the big question is whether bears might have the motivation to finally break-through.
On the driver side, Italy has become a focal point again as yields are rising in response to a slowing economy and a less-optimistic outlook across both Italy and the Euro-Zone as a whole. The big question here is whether that’ll last long enough for bears to re-encounter deeper support within this longer-term range. Such potential exists around 1.1270 and 1.1215, which is the 18-month low in the pair.
EUR/USD Daily Price Chart
Chart prepared by James Stanley
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
Forex Trading Resources
DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.
— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX