US Dollar Price Forecast: DXY Gains on Iran Muddle – GBP/USD and EUR/USD to Fall?

Market Overview

The dollar kept on rising and held firm above 99.40 after hitting a high of 99.45 – and it all came down to a combination of events. The main driver of the dollar’s surge was the ongoing kerfuffle in the Middle East which is spooking investors and prompting them to flock to the dollar as a reliably safe bet.

US Dollar Strength – Fueled by Geopolitical Tensions & Hawkish Fed Projections

Right now on the geopolitical front, Donald Trump said the US had a decent chat with Iran and seemed to suggest a deal might be in the offing but his optimism was short lived – Iran promptly denied anything had happened, leaving the region in a bit of a muddle.

Meanwhile, with all the talk of attacks on Iran’s gas infrastructure, the risk of things getting even more hairy in the region is looking greater than ever which is pushing folks towards safe havens and as a result giving the dollar a boost.

On the other hand, the CME Group’s FedWatch Tool suggests a US interest rate cut is off the table anytime soon – and that’s doing nothing to dispel the view that rates will stay put by the end of this year. The US Treasury bond yields are also rising accordingly, all of which combines to keep the dollar looking pretty strong.

US Dollar Index Forecast: DXY Holds 99.00 Trendline Support

The US Dollar Index – also known as the DXY – is bouncing around 99.20 on our 2 hour chart, clinging to a support formed by an ascending trendline & that 200-period moving average just below 99.00 . This whole zone has been acting as near-term support since we saw a recent rejection at 100.15 resistance level.

Prices are still below that 50-period moving average hovering around 99.60, which just about explains the consolidation we’re seeing right now. I’m also keeping an eye on the 99.40-45 area – it’s a pretty clear supply zone at the moment, and it’s been preventing any major recoveries from taking place.

Take a look at the Relative Strength Index – it’s pretty much stuck at 45, which is always a sign of neutral momentum, especially after all the ups and downs we saw in the intraday action.

Now if we can manage to break above 99.80, it might just open the door for 100.15, whereas if we start to lose 99.00, I think we could see 98.89 and 98.58 come into the picture as the next likely support levels.

GBP/USD Reclaims 1.3400 as Bulls Defend Key Demand Zone

GBP/USD is trading firm at around 1.3439 on the 2-hour chart, and staying aloft above that stubborn 1.3387 resistance level that had been acting as a block to the pair until now. The recovery is still being driven by the strong rebound from a support area around 1.3254 – 1.3299 . The buyers pounced in big as the price dropped precipitously during the day, and that helped it to bounce back strongly.

Price is currently held above the 200-period moving average which is sitting at 1.3380 while the shorter 50-period average is turning upwards at about 1.3360 – this tells us the short term outlook is improving . Key resistance is just ahead – first off 1.3477, then 1.3530, and 1.3575.

The RSI indicator is slowly moving its way back towards 60 which shows renewed upside momentum in the pair – not yet in an overbought condition though. If the price can break convincingly above 1.3477 the gains might just keep going all the way to 1.3530. But on the other hand if 1.3387 is broken – that would expose 1.3344 and 1.3299 as key lower support levels.

EUR/USD Tests Descending Trendline as 1.1600 Caps Breakout

EUR/USD has slipped up to 1.1608 on the 2 hour chart and now Its pressing against a descending trendline, that has really been guiding the overall downtrend since the area around 1.17. Price just recently popped up to 1.1637, but then started pulling back again – its pretty obvious that sellers are still lurking around just above that resistance level.

The pair is stuck right now above the 1.1576 pivot point, which has kind of flipped around to become the immediate line in the sand for support. Below that you got 1.1532 and 1.1486 marking two key horizontal spots that match up with some of the previous reaction lows – they’re kind of key levels to keep an eye on.

On the other side of things a strong break above 1.1637 would probably finally let price run up to 1.1697. The 50 period moving average is sort of trying to start pointing upwards, while the 200 period average is still trending down, lets be real here – that’s a pretty mixed bag of momentum signals.

Staying above 1.1576 helps keep the idea of a short term recovery alive; but if price does get rejected at 1.1637, it could really trigger another down turn.