Forex Market Outlook; EURUSD and GBPUSD Are Poised To Move Lower

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Forex Market Outlook; EUR/USD and GBP/USD Are Poised To Move Lower

All Wound Up And Waiting For A Catalyst

The currency market is getting wound up and that is a great thing for traders. The amount of confusion in the market driven by trade war, slowing economic indicators, Brexit, and uncertain central bank policy has weak hands chasing news trying to get on the right side of the market. What this means for traders today is that valuations for major currency pairs like the EUR/USD, GBP/USD, and USD/JPY are in no-man’s land, caught between rising levels of bullish and bearish sentiment. With each new headline, as each day passes, the pressure within each market builds. When it bursts traders can expect to see some big moves.

The EUR/USD – Lagarde Takes Over

Christine Lagarde took the reins of the ECB this week. She did not comments on fiscal policy in her first official speech as ECB President but she did comment on the “new world order” and its impact on the EU. She says the EU’s economy faces threats from both a slowdown in global trade related to trade wars and protectionist policies as well as from changes in technology. She wants the EU to be open to foreign trade but encouraged leaders to work harder at creating sustainable economic growth through domestic channels. She also says the bank stands ready to support the economy as needed. In light of today’s weak Eurozone PMI and the ECB’s already dovish stance sound like she’s ready to cut rates and/or fiscally stimulate the economy in some other way, moves that are sure to send the EUR crashing versus the dollar.

US Dollar Price Outlook in EUR/USD, GBP/USD and USD/CAD

EURUSD, GBPUSD, USDCAD Talking Points:

  • The US Dollar has had a wild past 24 hours ; first pushing up to a fresh two-year-high followed by an aggressive reversal after the release of yesterday’s PMI data.
  • USD is now testing support at prior breakout resistance, taken from the 97.70 level that previously marked the yearly high as well as the resistance side of an ascending triangle formation.
  • A number of themes remain volatile in nature, with both European Parliamentary elections and UK politics keeping both EURUSD and GBPUSD in the spotlight. In USDCAD, the pair remains range- bound ahead of next week’s BoC rate decision.

Do you want to see how retail traders are currently trading the US Dollar ? Check out our IG Client Sentiment Indicator .

US Dollar Rip and Dip

It was a climactic day across global markets on Thursday , extending what’s become a very active week. European Parliamentary elections are currently taking place, and this morning brought the announcement that British PM Theresa May will be stepping down on June the 7 th . Outside of these very key drivers, a number of price action themes availed themselves, driven in-part by the release of FOMC minutes on Wednesday .

As looked at yesterday, the US Dollar rallied up to the two-year-high after the release of FOMC meeting minutes . And prices in USD did pose a topside push to establish a fresh two-year-high. But, that’s where the music stopped, and following the release of some poor PMI’s from yesterday , prices quickly reversed and pushed right back to a key area of support. This comes-in around 97.70, which was the prior yearly high, helping to set resistance in the longer-term ascending wedge pattern that punctuated the backdrop coming into Q2.

US Dollar Daily Price Chart

Chart prepared by James Stanley

EURUSD Prone to Gap Risk Around Euro Elections

Going along with that reversal from fresh highs in the US Dollar, EURUSD put in a reversal after tip-toeing down to a fresh low. The 1.1100 area on the chart remains unfettered as sellers were unable to elicit a test-below this week. As looked at in yesterday’s webinar, a key area of chart resistance remains of interest, taken from prior range support that printed in EUR/USD from 1.1187-1.1212 . Price action remains in this area ahead of this morning’s US open, but traders would likely want to move forward with a bit of caution here as a big theme of weekend risk could elicit outsized gaps to start next week’s trade.

EURUSD Four-Hour Price Chart

Chart prepared by James Stanley

GBPUSD Back Down

It’s been a busy morning in the UK as markets finally got word of Theresa May’s resignation , set to take place on June the 7 th . The likely successor, Boris Johnson, has already been speaking around Brexit this morning, threatening to take the UK out of the EU without a deal by October 31 st of this year.

After an initial bounce of strength on Ms. May’s resignation announcement, prices have found resistance and started to move-lower again, taken from a key area of prior support in GBP/USD . Deeper support potential exists around the 1.2603 level that helped to set the five-month-low in the pair earlier this week. And a bit lower, around 1.2525 is another level of interest, followed by the 1.2442 ‘flash crash’ low that came into play earlier this year.

We are likely in for some continued volatility around UK markets, so traders would like want to remain cautious on both sides of the matter for the foreseeable future.

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GBPUSD Hourly Price Chart

Chart prepared by James Stanley

USDCAD Retains Range as 1.3500 Holds the Highs

While the US Dollar has been on the move this week, so has its Canadian cousin. This amounts to a continued range in USDCAD that became especially interesting in the latter-portion of this week, as a quick dip to support was followed by a strong push up to resistance. That resistance has since held and the range continues, leading into next week’s Bank of Canada rate decision.

USDCAD Four Hour Price Chart

Chart prepared by James Stanley

Will next week’s BoC finally be the catalyst that USDCAD needs to move back into trend ? The Bank of Canada has been noticeably dovish of recent, removing hints of future rate hikes at the bank’s last rate decision in April. But – will they commit to cuts, something that Jerome Powell and the Federal Reserve appear reticent to do?

From the Daily chart, bullish biases can remain attractive given the higher-lows that have printed since the January swoon in the pair. A topside break above the 1.3500 zone exposes resistance potential around 1.3567 followed by 1.3640.

USDCAD 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 have a section for each major currency, and we also offer a plethora of resources on Gold or 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 an abundance 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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

US Dollar Price Outlook: EUR/USD, GBP/USD, USD/JPY

US Dollar Talking Points:

  • The US Dollar is holding the confluent support zone looked at yesterday.
  • EUR/USD has held its own support and GBP/USD bulls continue to push. On the side of USD-strength, USD/JPY continues to carry an attractive backdrop into the second-half of October.
  • DailyFX Forecasts are published on a variety of markets such as Gold , the US Dollar or the Euro and 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 .

The US Dollar has inched lower over the past 24 hours as the Q4 pullback in the USD has run into support. That support was looked at in yesterday’s article and was coming from a couple of different areas. The first of which is a bullish trendline that connects June and late-August swing lows. The other element of support emanates from April and May resistance, taken from around 98.33-98.50 in DXY. This zone of prices started to come into play last Friday and remains of issue ahead of the Wednesday US open.

US Dollar Eight-Hour Price Chart

Reading between the lines, sellers were able to tip-toe down to a fresh low last night. But they weren’t able to take control of the matter and prices have pushed right back into this key zone on the chart. This leaves potential for either scenario of strength or weakness and as looked at in yesterday’s webinar, there’s a number of markets that can remain attractive for each .

EUR/USD Bounces From Bear Flag Support

This was looked at in yesterday’s morning article as EUR/USD was pushing below the 1.1000 handle. But, as discussed in the webinar later in the day , there was a ‘nexus’ of confluence at this zone as a bearish trendline that held the highs in the pair from July into last week intersected with the support side of a bear flag formation. That support has since held but buyers have been yet again thwarted at the 1.1050 level on the chart. This can keep the door open for short-term range strategies, looking for a revisit of 1.1000 or, alternatively for Euro bulls, looking for a topside break of this week’s high to re-open the door for continuation of strength within the shorter-term rising channel.

EUR/USD Four-Hour Price Chart

GBP/USD: Cable Bulls Keep it Up

On the short-side of the US Dollar I’ve been following GBP/USD for some time now. A long-term trendline came into play in August and finally helped to stem the bleeding after a brutal summer in the British Pound. September saw bulls re-enter the fray, posing a retracement of more than 500 pips in the first few weeks of last month. And after a pullback to a key area of support, bulls came back into the fray and have largely remained in-charge ever since.

In yesterday’s webinar I looked at pullback potential , focusing in on the zone from 1.2671-1.2705 for higher-low support. That came into play overnight and prices re-ascended towards the 1.2800 level but have again fallen short. This could possibly open the door to short-side swings although given the counter-trend nature of that approach, traders would likely want to focus on the risk side of the coin with nearby stops so that if the bullish breakout does get another wind, losses can be mitigated. On the long side of the pair, prices are overbought and stalling at resistance, so traders would likely want to either a) look for a deeper pullback or b) integrate bullish breakout logic.

GBP/USD Two-Hour Price Chart

USD/JPY Pullback from Fresh Highs

As looked at last week, bullish scenarios in USD/JPY began to get more attractive as the pair pushed up to resistance even as the US Dollar was showing weakness in the first-half of October. This highlights the additional Yen-weakness that’s come into the fray and the pair pushed up to fresh two-month-highs yesterday. The prior zone of resistance that runs from 108.47-108.70 has come back into play and as looked at in yesterday’s webinar, this could be looked to for bullish continuation scenarios in the pair, keeping USD/JPY as one of the more attractive ways to look for USD-strength in the current backdrop.

USD/JPY Four-Hour Price Chart

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or 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 an abundance 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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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