EUR/USD, GBP/USD and USD/CAD show signs of reversing
The dollar is coming back into favour, with rate cuts now largely priced in. Will that spark reversals for EUR/USD, GBP/USD and USD/CAD?
EUR/USD giving up gains, as it heads into trendline support
EUR/USD gains are starting to erode, with yesterday's declines looking likely to be followed up by yet another move lower today. The rise into 76.4% Fibonacci resistance ($1.1366) points towards a potential move lower from here, with the bearish engulfing pattern adding to that bearish view.
Trendline support is going to be key here, with a break below this ascending trendline and the $1.1275 level bringing a wider bearish picture into play. Ultimately, this appears to be a case of markets looking beyond the widely expected Federal Reserve (Fed) rate cut, to instead note the significant economic impact that appears inevitable in the eurozone. With the dollar expected to resume its role as a haven once this easing phase is over, there is reason to believe that the dollar will come back into favour before long. That could begin today, with a break below $1.1275 required to provide greater confidence of a move lower from here.
GBP/USD rate cut declines fail to hold
GBP/USD saw a sharp move lower this morning, after the Bank of England (BoE) imposed a 50 basis-point rate cut. This was largely expected to come at some point, with the failure to hold those losses highlighting that fact.
The four-hour chart highlights how this recent pullback has respected the 76.4% Fibonacci retracement and could push higher. Given the lessened impact of the virus in the UK compared with mainland Europe, there is still a case for sterling strength. Thus, watch for a potential rise from here as we build on the decline into Fibonacci support. A break back below today's low would point towards further downside coming into play.
USD/CAD easing back from major resistance level
The decline in crude prices have sparked a bout of buying for USD/CAD, sending the pair into the $1.3794 resistance level (2017 high). With the price gradually moving lower, the Canadian dollar is trading in much the same manner as Brent.
With that in mind, it is likely that another breakdown for crude could lead USD/CAD back into the $1.3794 resistance level. A break above there would signal a likely push onwards and upwards for this pair. With that in mind, there is a chance we are retracing as a precursor to further upside. However, it makes sense to await a break through either $1.3609 or $1.3796 to bring a directional signal for this pair.
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
