AUD/USD slumps and EUR/USD edges lower, while GBP/USD looks towards the next UK rate hike
The Aussie dollar is losing ground in the wake of a fresh RBA rate hike, while the euro and sterling are both giving back some gains against the US dollar.
EUR/USD edges back towards $1.22
The rebound continues here, with EUR/USD taking advantage of the US dollar’s short-term bout of weakness, and bolstered by the European Central Bank's (ECB) decision to hike interest rates in July.
Further upside continues to target the $1.035 area that marked the lows in May and June, and denotes potential resistance as the pair rebounds for the time being. Above this level, we would watch the 50-day simple moving average (SMA), currently $1.041, with trendline resistance from the late May-high potentially in play around $.1036.
Price action has yet to denote a reversal, but a drop below the $1.0146 low from last Friday would provide a possible start to a move lower, which would then put parity and $0.9953 into view.
GBP/USD still climbing ahead of BoE meeting
Given that the Bank of England (BoE) is expected to deliver a 50 basis point (bps) rate hike this week, the strength of is not surprising, with GBP/USD. Only once the statement and press conference are done will we have a better sense of whether the macro outlook supports further gains for the pair.
Having recovered the 50-day SMA, the price now targets $1.2366, the mid-June high, and then on towards the late May-highs around $1.2635. If it can exceed this lower high then evidence of a reversal in trend would begin to build.
As with EUR/USD, the price has yet to begin a reversal, though a drop back below $1.209 would suggest that a fresh decline could be underway, heading in the first instance towards the July-low at $1.176.
AUD/USD slumps despite RBA rate hike
The Reserve Bank of Australia (RBA) move to tighten policy by 50 bps has pushed interest rates to their highest level in six years. But this has done little for AUD/USD, which has begun to move lower in a textbook example of ‘buy the rumour, sell the fact’.
This comes in the wake of a rally for the pair since the July-low. The price briefly moved above $0.70 yesterday, but the reversal here could now be in play. If this marks a reassertion of the downward move, the lows from July down at $0.6747 come into play once again.
A revived bullish view requires a move back above $0.70, to then target the 16 June-high at $0.7069.
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