EUR/USD, GBP/USD and AUD/USD head lower after recent retracement

EUR/USD continuing its decline after recent upward retracement

EUR/USD has kicked off the week with a similar bearish tone to that seen on the back end of last week. Declines seen throughout the indices space has brought renewed demand for the dollar, which rather predictably brings a bearish continuation of this pair.

From this daily chart we can see the pattern of lower highs, with the recent rally taking us within close proximity to trendline resistance once again. A break up through the $1.0198 swing high would bring about a more positive outlook, with bearish positions favoured until such a move occurs. With the price instead turning lower, the bearish trend holds, with further downside expected from here.

GBP/USD rolling over from trendline resistance

GBP/USD has similarly been rolling over after a period of gains that took the price back up into trendline resistance. The long-term downtrend remains in place despite the recent period of upside, with the failure to rise through $1.1738 bringing expectations of another leg lower here. Crucially, we have also seen the stochastic roll over from overbought territory, highlighting the shift in momentum to favour the bears.

Looking back over the course of the year thus far, we have seen the stochastic move back out of the overbought zone three times, each of which provided a timely signal of impending downside. This appears to be another one. As such, short positions are favoured here, with a rise up through the $1.1738 level required to negate that view.

AUD/USD tumbles into two-year low in early trade

AUD/USD is wasting no time getting going this week, with the pair slumping into a two-year low in early trade today. A weekend collapse in the Caixin services purchasing managers index (PMI) out of China did provide a worrying signal, with the impressive August figure of 54.5 collapsing into a contractionary 49.3 reading for September.

Understandably, the notion of a Chinese crisis brings fear for the Australian economy. From a charting perspective, this latest decline brings the beginning of the next leg lower, with the latest rebound proving minimal compared to the moves for the European currencies. The creation of a lower low thus continues the downtrend, with bearish positions favoured unless the price rises through the recent swing-high of $0.6547.