EUR/USD, GBP/USD and EUR/GBP Forecast – US Dollar Continues to Strengthen

EUR/USD Technical Analysis

The euro initially tried to rally a bit during the trading session on Friday, but gave back gains to show signs of weakness again. The 1.1550 level has offered support, and if we can break down below there, then the market really could fall apart, going toward the 1.14 level, with the 200-day EMA sitting there as well. All things being equal, this is a market that I think ultimately, if we do bounce, it’s likely that the 50-day EMA at 1.1650 could offer a bit of a barrier, right along with the 1.17 level.

All things considered, the market did break down below not only the 50-day EMA but also an uptrend line. It’s worth noting that the U.S. dollar has done pretty much nothing but strengthen since the FOMC meeting, not in October but September, when we started seeing rate cuts, and nobody really seems to care.

GBP/USD Technical Analysis

The British pound is falling pretty significantly and has broken massive support. I think at this point we could be talking about a move all the way down to 1.2750 before it’s all said and done. Short-term rallies continue to see the 1.32 level as resistance, and with that being said, I think you’ve got a situation where traders continue to fade rallies as they occur, with the 200-day EMA at 1.3272 offering a bit of a short-term ceiling. Really, at this point, I just don’t see how you do anything other than fade any type of rally that shows exhaustion.

EUR/GBP Technical Analysis

The euro has rallied quite nicely against the British pound during the trading session on Friday, and it looks like we are trying to break out to the upside. When you look at the previous consolidation, the area between 0.86 and 0.8750 measures for a 150-pip move on a breakout. That could open up the possibility of a move to the 0.89 level. All things being equal, this is a market that I think would end up showing more of a buy-on-the-dip type of scenario, with 0.8750 being a bit of a floor in the market. With the weakness that we’ve seen in the pound being so exacerbated, I think you’ve got a shot at seeing this market not only hit 0.89 but possibly even higher than that.

For a look at all of today’s economic events, check out our economic calendar.