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

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Contents

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.

Pound Outlook: GBP/USD Finally On the Move

Pound Technical Highlights:

  • GBP/USD’s tight price action should give-way to a move soon
  • There are a couple of key levels/lines/pattern to watch

GBP/USD’s tight price action should give-way to a move soon

GBP/USD has been on a planet of its own in recent trade doing nothing notable as other currencies made big moves in the past week. Even the Euro, which was long overdue for volatility, finally woke up prior to GBP coming out of its slumber. The participation on Friday should set up the next week with more volatile price action.

The choppy downward price behavior is initially resolving lower into support around the 12770/12693-area. This zone is created by price support back to May and the 200-day MA. Friday’s sell-off may turn out to be a false move, as often times is the case with cable after coming out of a congestion area.

But for now, though, I will respect the break. However, should we see it turn higher off noted support back over the 13000-line, then a broader rally could very well begin to evolve. Longer-term, GBP/USD appears to be putting in a bottoming formation.

Since December of 2020 the price sequence is taking on the shape of a bottoming inverse head-and-shoulders pattern, but it is a bit premature to discuss beyond a sentence or two. If a rally does begin to grow legs above 13000, we can start to discuss a run to the neckline situated up near 13600, and possibly beyond.

GBP/USD Daily Chart (initial break lower)

GBP/USD Weekly Chart (Bottoming pattern could be developing)

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Forex & CFD Trader Resources

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment , quarterly trading forecasts , analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex .

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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

Trading Outlook for EUR/USD, USD/JPY, CHF/JPY, Gold Price, DAX & More

The dollar spectrum is a bit of a mix here at this time, with few clean set-ups to speak of. The euro is neither here nor there, but has levels to the top and bottom-side to reference. To the contrary, USD/JPY looks poised to make an explosive move soon (CHF/JPY too). The DAX broke down from a bearish rising wedge today, it’s poised to trade lower in the near-term. Watching or signs of a higher low to form in gold.

Technical Highlights:

  • EUR/USD has strong support, but lacking upside conviction
  • USD/JPY ready to make a move (CHF/JPY too)
  • Gold price decline has higher low scenario in play
  • DAX broke bearish rising wedge, more weakness expected

We just released fresh quarterly forecasts, to see our fundamental and technical insights on major markets and currencies, check out the DailyFX Q3 Forecasts.

EUR/USD has strong support, but lacking upside conviction

The euro found strong support in the 11500s and has since seen a bit of a rebound, but momentum and the broader trend aren’t bringing to the table with it much conviction. On the top-side there are the 11800s to contend with (11790 touched on Monday), which could turn EUR/USD back lower if it hasn’t already seen its best levels.

If Monday’s high holds, a descending wedge could form with 11500 as major flat bottom support to the pattern. It’s only a scenario now, but with a little more time it could present an intriguing set-up. For now, from where we sit the euro is ‘neither here nor there’.

EUR/USD Daily Chart (between levels, potential wedge)

For more in-depth fundamental and technical analysis, check out the Q3 Forecast for the Euro

USD/JPY ready to make a move (CHF/JPY too)

USD/JPY is right at the tip of a tightening ascending wedge, implicating it is very near making a sizable breakout. Standing right at the end of the pattern is a well-defined (clean connecting points) trend-line extending down from 2020.

The pattern implies a breakout to the upside with the higher lowers, but we can’t rule out a turn lower in line with trend resistance. Preferably, if USD/JPY is to break to the top-side, given the duration of the trend-line, it confirms with a weekly close above. (We’ll be taking another close look at this in Friday’s “Charts for Next Week” webinar…)

USD/JPY Daily Chart (Ascending wedge, 3-yr trend-line)

CHF/JPY is up against pretty stiff resistance at this time, but very near breaking out of an ascending wedge. The price structure since March even has an inverse head-and-shoulders look to it as well. In either case – wedge or H&S – a break above resistance in the 11200s should have the yen cross running, while a breakdown below rising support could spell trouble.

CHF/JPY Daily Chart (Wedge/H&S, nearing a breakout)

For more in-depth fundamental and technical analysis, check out the Q3 Forecast for the Japanese Yen

Gold price decline has higher low scenario in play

This has been one of the focal themes this week – a higher low forming before at least one more push higher. The low needs to form soon, preferably at or above the 2020 trend-line, for this to hold any real weight. Should buyers step up soon, looking for a further recovery towards the upper parallel of the channel dating back to April.

Gold Daily Chart (Higher low to form?)

For more in-depth fundamental and technical analysis, check out the Q3 Forecast for Gold

DAX broke bearish rising wedge, more weakness expected

In yesterday’s webinar, we discussed the rising wedge scenario for the DAX and three ways in which it could unfold. The first option, simply break the underside trend-line and start to sell-off is the one which is in the works. (To see the other two, check out yesterday’s webinar archive. ) With the break in place, the target is set on a test of the February 2020 trend-line down around 12200.

DAX Hourly Chart (Rising wedge confirmed)

For more in-depth fundamental and technical analysis, check out the Q3 Forecast for Global Equity Indices

Resources for Index & Commodity Traders

Whether you are a new or an experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment , quarterly trading forecasts , analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex .

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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

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