EUR/USD and GBP/USD fall back while USD/JPY rallies, as investors await central bank decisions
The dollar has recovered to an extent this week, but the uptrends in EUR/USD and GBP/USD, along with the downtrend in USD/JPY, remain intact for now.
EUR/USD continues to drop back from recent high
A modest pullback continues here with EUR/USD, eating into gains made since the beginning of the year.
As markets brace themselves for a double hit of a Federal Reserve (Fed) and European Central Bank (ECB) meeting within a 24-hour period, EUR/USD has fallen back somewhat from the eight-month highs it reached last week. This is the first real weakness since the first week of January, and would leave the uptrend intact unless we see a move back below $1.04.
If the price recovers above $1.05 then the bullish view is arguably intact and a bounce back towards $1.09 and higher may well develop.
GBP/USD stalls at December high
Weakness here with GBP/USD has seen the price falter at a similar level to early December, with a possible negative divergence in the daily moving average convergence/divergence (MACD) sending a cautionary signal for bulls.
Just as EUR/USD traders have to deal with the Fed and ECB decisions within the same 24-hour period, cable traders must cope with the Bank of England (BoE) decision following hard on the heels of the Fed’s. Much thus depends on that period for the next move in GBP/USD, though it will still arguably take much steeper losses to reverse the broadly bullish outlook.
For that to happen we would need to see a drop below the 50-day simple moving average (SMA), followed up by a fall below the 200-day SMA. Having failed to establish a higher high, and with the MACD negative divergence a risk, the uptrend could come under pressure. A reversal above $1.24 would put the buyers back in charge.
USD/JPY edges up
The greenback in USD/JPY has seen a modest recovery off its January lows, as the Bank of Japan (BoJ) dials down any hint of hawkish rhetoric.
Nonetheless, the downtrend is still firmly placed. A move back above the 50-day SMA to suggest perhaps some further short-term strength, but the mid-December high around ¥134.00 would act as a barrier.
Sellers will be looking for a fresh reversal that puts a move back to the January lows in play, and then sees a move below the May 2022 low around ¥126.50.
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