EUR/USD, GBP/USD and AUD/USD rebound unlikely to last
EUR/USD, GBP/USD and AUD/USD see near-term gains after a volatile US CPI reading, but wider bearish trends point towards potential bearish reversals before long.
EUR/USD volatility resolves in a push higher
EUR/USD has started to reverse upwards after a day of major volatility which saw US core inflation reach a 40-year high of 6.6%. Nonetheless, while we initially saw the price drop back into the 76.4% Fibonacci support level, we have resolved with a risk-on move that is driving EUR/USD upwards.
Crucially, that move has brought the price up through the $0.9774 resistance level, ending the intraday trend of lower highs. Subsequently, we turn towards the wider trend, with a descending trendline built over the course of 2022 providing a potential upside target.
With the ongoing pattern of lower highs evident here, short-term upside looks to provide a potential selling opportunity. That view would be negated with a push up through the trendline and $1.00 handle. Potential points of reversal are provided by the Fibonacci tool, with $0.9815, $0.9859 and $0.9913 in view.
GBP/USD rebound takes the price back into trendline resistance
GBP/USD has been on the rise since yesterday’s consumer price index (CPI) fuelled volatility, with the price rising back towards a key confluence of resistance. The descending trendline and 76.4% Fibonacci resistance level point towards a potential swift bearish reversal if the ongoing trend of lower highs is to continue.
With Kwasi Kwarteng expected to return to the UK early to discuss further potential budget U-turns, we may yet see another boost for the pound.
Nonetheless, unless the price rises through the $1.1495 swing high, there is a good chance that the price soon reverses downwards to continue the trend of lower highs evident over recent months.
AUD/USD rallies into key resistance zone
AUD/USD similarly found a bid yesterday, with soaring underlying inflation in the US signalling a likely continuation of the Federal Reserve (Fed) tightening planned over the coming months. Meanwhile, the latest 25-basis point (bp) hike from the Reserve Bank of Australia (RBA) signal a far slower pace of tightening in Australia.
This explains the relative underperformance we are seeing here, with the price still far from the major swing high of $0.6547. Instead, we have seen the price rise back into the intraday swing high of $0.6346, which also tallies up with the late-September low of $0.6363.
A break up through that zone of resistance would bring a wider rebound into play. However, until that happens, there is a good chance we see the price reverse lower from this resistance zone.
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