EUR/USD in free fall as US dollar index rallies, EUR/GBP depreciates

EUR/USD continues its free fall towards key support

EUR/USD continues its swift decline and is now trading at level last seen in March 2017 as Russia halts gas exports to Poland and Bulgaria with the cross having slid through the December 2015 low at $1.0525 and it fast approaching key support seen between the March 2015, December 2016 and January 2017 lows at $1.0463 to $1.0341.

We expect this major support zone to hold this week. Should this not be the case, the major psychological $1.00 mark, or parity, would be targeted.

Minor resistance comes in at the March 2020 low at $1.0638 as well as between the 14 and 19 April highs at $1.0758 to $1.0761. Further up sits the March low at $1.0806.

EUR/GBP faltered around the 200-day simple moving average and is heading back down again

EUR/GBP’s rally off the mid-April low at £0.8250 low stalled marginally above the 200-day simple moving average (SMA) at £0.8447 at this week’s high at £0.8467 as Gazprom halts gas exports to Poland and Bulgaria, pushing the Euro lower.

A slide back towards the 11 April high at £0.8380 is thus at hand, a slip through which would engage the 55-day SMA at £0.8359 and the 28 March low at £0.8322. These levels offer potential support with the 8 April low at £0.8308.

Only a currently unexpected rise above this week’s high at £0.8467 would put the late-March peak at £0.8512 back on the cards.

US dollar index parabolic advance nears the pandemic peak at 103.82

The US dollar index’s (DXY) parabolic rise, on the back of a more aggressive pace of US Federal Reserve (Fed) tightening to combat surging inflation and worries about the impact further lockdowns in China and a weak Yuan may have on the world economy, pushes it towards the March 2020 pandemic peak at 103.82.

The past five days of straight gains show no signs of ending but the pace of the advance is not sustainable, and the cross is thus expected to at least short-term stall close to the January 2017 and March 2020 highs at 103.80 to 103.82.

If overcome, however, the July 2002 low at 104.12 would be next in line.

There is no support to speak of until the higher weekly uptrend channel line at 101.25 and last week’s high at 100.92, the May 2020 high at 100.60 and the psychological 100.00 mark, all of which are a long way off.

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