EUR/USD, EUR/GBP and GBP/USD form interim tops
Outlook on EUR/USD, EUR/GBP and GBP/USD amid pared back rate cut expectations.
EUR/USD drops for three straight days as greenback regains lost ground
EUR/USD's bearish reversal off its December $1.1139 high, made near its 27 July high at $1.1149, has so far taken it to Tuesday’s $1.0939 low as excessive rate cut expectations were pared back and yields rallied.
Further downside remains likely with the $1.09 region and the 200-day simple moving average (SMA) at $1.0846 representing possible targets. Good resistance can be spotted between the $1.1009 to $1.1017 November and mid-December highs.
EUR/GBP flirts with 200-day SMA
EUR/GBP’s drop from its £0.8714 December high has taken it back to the 200-day SMA at £0.8656 and Tuesday’s low at £0.8646 as investors position themselves for the new year.
A slip through £0.8646 would engage the mid-December high at £0.8634 whereas a rise above the 55-day SMA at £0.8672 would put Tuesday’s high at £0.8682 and the 21 December peak at £0.8685 on the cards.
GBP/USD forms interim top
GBP/USD briefly made a new five-month high at $1.2828 in late December before giving back some of its gains as traders bought back their short US dollar positions and as the greenback appreciated on pared back rate cut expectations which led to higher US Treasury yields.
Negative divergence on the daily Relative Strength Index (RSI) warned of a sell-off in the GBP/USD pair which on Tuesday flirted with its 21 December low at $1.2612. While it and Tuesday’s $1.2611 low hold on a daily chart closing basis, the breached November-to-January uptrend line, now a resistance line, at $1.2678 may be retested. Further up minor resistance can be spotted at Thursday’s $1.2701 low. A fall through the $1.2612 to $1.2611 support zone would put the 200-day SMA at $1.2531 and the December low at $1.2501 on the map.
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