EUR/USD, GBP/USD and EUR/GBP Forecasts – US Dollar Continues to Soften

EUR/USD Technical Analysis

The 1.1850 level is a pretty significant barrier that extends down to the 1.18 level. Because of this, it will be interesting to see how this plays out over the next couple of days as we have almost no liquidity, and of course, we won’t be open on Christmas Day.

At this point in time, I think we are trying to set up for a major challenge. If we can break above the 1.1850 level on a daily close, then I think the Euro does start to rally to the 1.20 level. If we fail here, then a little bit of consolidation at the top of a larger consolidation pattern still remains.

GBP/USD Technical Analysis

The British pound has reached the 1.35 level, an area that I suggested that if we could get above 1.3450, we would hit, and it has pretty quickly. So now the question is: will it roll over here? We are right in the middle of the previous cluster that goes through May to October for the most part, and this is an area where you could run into a little bit of trouble.

If we continue to break to the upside, the 1.37 level could be targeted, but I do believe at this juncture the 1.34 level is an area that a lot of people will be watching. If we fall back below there, then I think that is a very negative sign. As things stand right now, the British pound does look positive. Quite frankly, the British pound has outperformed most other currencies against the US dollar over the last two years, so if there is dollar weakness, this is one of the first places I look.

EUR/GBP Technical Analysis

Finally, the Euro dropped a little bit against the British pound only to turn around and show signs of life. The 0.8750 level is an area that sits just above, and it was previously resistance. It should now be supported.

If we can break above a 50-day moving average that is sitting just above where we are, then it opens up a move to the 0.88 level. I anticipate consolidation here more than anything else, but anybody who trades this pair really shouldn’t be surprised because that is what it does most of the time. If we break down below the lows of the day, maybe the 0.87 level for safety, then this thing probably rolls over and drops pretty significantly.

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