EUR/USD, GBP/USD and EUR/GBP Forecasts – US Dollar Still Soft After FOMC

EUR/USD Technical Analysis

The euro has rallied again during the early hours here on Thursday as the US dollar continues to soften a bit. This was driven, of course, by the announcement of bond purchases coming out of the Federal Reserve and this weakened the US dollar. It’s essentially quantitative easing, although they explicitly said it isn’t. Not sure if this is like a year and a half ago, when we had negative GDP for two quarters, but it wasn’t actually a recession.

I think it’s that kind of nonsense. Nonetheless, the 1.18 level continues to be a significant resistance barrier, so we’ll have to see how much momentum the euro can pick up between now and then to see if it can smash through there. That is the most important level on this chart. Underneath, we have the 50-day EMA at the 1.1617 level offering support.

GBP/USD Technical Analysis

The British pound looks like it’s trying to break above the crucial 1.34 level after initially dipping. We’ll just have to wait and see how that plays out. But with that being said, I think you have a situation where there is a lot of supply just above. And although it’s obviously tilted to the upside recently, the question is, can we break out? The reasoning this particular pair may struggle a little bit is the fact that the Bank of England is getting ready to cut rates. So, we’ll see how that plays out. Perhaps they do bond purchases as well. Then you have the same situation in both economies. We’ll just have to wait and see. Right now, though, I wouldn’t short, at least not without signs of exhaustion.

EUR/GBP Technical Analysis

The euro rallied slightly against the British pound, but you can see we’re still hanging around the 50-day EMA and perhaps more importantly, the 0.8750 level. This is a pair that can go long periods of time chopping back and forth, so hanging out here really isn’t surprising to me. If we do break out to the upside, the 0.88 level would be your next target. If we break down from here, then 0.87 could be a target, followed by 0.8670. All things being equal, though, it is worth noting that we have just tested a major cluster of resistance going back a couple of years here.

So only time will tell, but right now it still looks like there’s overhead resistance as we have given up some of the gains. A slow mover for sure, but we’ll just have to wait and see how this plays out. The Bank of England, of course, is expected to cut rates next month. That’s part of what’s showing up on the trend; whether or not that ends up changing the trajectory of the pair remains to be seen. It could be a hawkish cut, or the ECB could find itself in a situation where it just doesn’t have any reason to be tight, and then maybe we hang out and go sideways.

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