Dollar strength bolsters USD/JPY while pushing EUR/USD and GBP/USD lower
Expectations of higher interest rates in the US having driven gains for the dollar, leading to some losses for EUR/USD and GBP/USD.
EUR/USD reverses Friday’s gains
The bulls will continue to be pleased by EUR/USD's ability to hold its ground, despite dropping below the 50-day simple moving average (SMA).
A dip towards $1.06 was met by buying pressure last week, helping to support the view that the pair is currently in a pullback within a broader uptrend. It would need a much steeper decline, below $1.04 to put a real dent in the bullish view.
A recovery above the 50-day SMA would support the bullish view and open the path to $1.10 again, and potentially to a fresh higher high.
GBP/USD threatens to reverse course
GBP/USD continues to resist a move below the 200-day SMA, helping to hold a more bearish view in check.
While it is true that the buyers have been unable to reassert control, the price has avoided any deeper falls for now. Last week’s failure to break back above the 50-day SMA was a negative development, but could be reversed, which could build a fresh bullish view and open the way for a move back to, and potentially above, the $1.24 area. This was resistance in December and January, so for now it stands in the way of a bigger recovery.
Sellers will need to breach the 200-day SMA to the downside, and then push on below January’s lows around $1.187 to suggest the bearish view has gained renewed traction.
USD/JPY moves cautiously higher
After the rally on Friday was knocked back, USD/JPY held its ground on Monday, but still lurks in potential lower high territory.
Sellers will want to see a fresh decline below ¥133.00 accompanied by a bearish moving average convergence/divergence (MACD) crossover, to suggest that the downtrend from late October is back in play. This then opens the way to the January lows below ¥128.00.
Further gains towards the 200-day SMA continue to bolster the neutral view, with a medium-term bullish move requiring a move back above ¥138.00 the mid-December highs, at the least.
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