Forex Forecast: Dollar Strengthens as EUR/USD Rally Fades

EUR/USD Technical Analysis

The Euro has been slightly negative during early trading here on Monday.

I find this interesting because, according to the daily charts, we have formed two shooting stars in a row, and we are starting to break a little bit lower. Is 1.17 a bridge too far? Is the market starting to perhaps think about that situation with the Treasury doubling its buyback purchases of the 30-year bond?

After all, all they did was go from $2 billion to $4 billion, which is the same as every other duration. In other words, they’re just equalizing out the market. Now, there would have been a whole host of reasons to do it, but maybe this doesn’t mean what the initial reaction suggested. We’ll just have to wait and see, but this is a market that I’m watching very closely, and I am looking to get bearish on it.

GBP/USD Technical Analysis

The British Pound is a little bit different, but it is also, on the daily chart, starting to show signs of exhaustion right here at a swing high. So, if we stay in the same range that we’ve been in, one would think that the sellers probably would have to show up sooner or later.

The market for me right now is somewhat neutral, but I am leaning a little bit bearish. We’ll just have to see how that plays out. This is my least favorite currency to buy the US Dollar against at the moment, so definitely something to think about.

USD/CAD Technical Analysis

The US Dollar against the Canadian Dollar is a long that I actually had initiated a couple of days ago. And now that the trade negotiation has broken down completely between the United States and Canada—in fact, PM Mark Carney suggested that they were in an economic war with the United States in Canada—that’s not going to bode well for the Canadian Dollar. The Canadian economy is highly dependent on the United States, and even if they chose not to be, it’s not something that can be changed overnight.

So when we look at the Dollar against the Canadian Dollar on the longer term, perhaps the daily chart, we can see that we just bounced from a technically significant support level in the form of 1.3750 on Friday and had also bounced from there on Thursday, and now we find ourselves 100 pips higher than that.

Now, I don’t know that I would say this is an extraordinarily bullish chart. I think it’s more or less range-bound on the daily chart, but in the short term, it certainly looks like the headlines are driving it higher, and the interest rate differential could come into play as well. I still like going long here; I don’t have any qualms doing so. Short-term pullbacks look attractive to me.