EUR/USD, GBP/USD and EUR/GBP Forecasts – Dollar Slips Early on Monday

EUR/USD Technical Analysis

The Euro has rallied significantly in early trading on Monday, but let’s keep in mind that it has sold off multiple days in a row. Additionally, it is Martin Luther King Jr. Day in the United States, which may create some liquidity issues. The 50-day EMA sits above, offering resistance, and therefore, I think you have to look at that as a bit of a barrier, but I also recognize that the market now finds itself right in the middle of the larger consolidation area.

In other words, I don’t think much has changed. Part of what you’re seeing here is a lack of participation. So, I wouldn’t read too much into this, and I still would anticipate that there’s a little overhead noise that could keep the Euro a little soft.

GBP/USD Technical Analysis

The British pound has been much better, but that’s not a huge surprise. The British pound has been quite strong in comparison to many other currencies. So, if the Euro rallies against the dollar, the British pound does as well, and a little bit more.

That being said, the market still has a lot of resistance between here and 1.3550, so I’m looking for signs of exhaustion for potential selling opportunities. We are hovering right around that crucial 50-day EMA.

EUR/GBP Technical Analysis

And finally, the Euro has rallied slightly against the British pound only to give up those gains, which is not a surprise when you look at the other two charts. There is a certain amount of resistance right around 0.87 that continues to cause a ceiling in this market, but we also have the 200-day EMA sitting just below, offering support. I think we continue to see a lot of this sideways action in the short term, but once we break out of this little range run, then we have a bit more clarity.

I still look at this as a market that’s in the midst of rolling over for a bigger picture due to the fact that the ECB is pretty much flat, but the Bank of England has been fighting the idea of rapid rate cuts. Furthermore, keep in mind that there are several important numbers, including inflationary numbers and employment numbers, coming out of the United Kingdom this week that will obviously have an influence here.

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