US Dollar Price Forecast: Hawkish Fed Risks Rally – Will GBP/USD and EUR/USD Crash?

Dollar Holds Near 100 as Energy Shock Reshapes Global FX Dynamics

The US Dollar index is hanging around the 99.90 to 100 level, and thats because two big things are happening in its favour: people are flocking to safe assets due to all the instability in the Middle East and the Fed is no longer so keen to cut interest rates because of all the inflation that’s being driven by rising oil prices.

With WTI oil just shy of the 90 to 95 dollar mark and Brent pushing up towards 107 to 109 dollars, the market has effectively kicked the idea of the Fed cutting rates into touch, and that’s reinforcing the dollar’s advantage when it comes to attracting investors against its rivals.

Euro Squeezed by Energy Dependence and Mixed ECB Signals

The euro is trading around 1.153-1.155, and it’s getting squeezed from all sides. The fact that Europe is so reliant on imported energy and that a key shipping route has been disrupted is making the cost of living there go through the roof.

Some ECB officials – like Bundesbank president Joachim Nagel – have come out sounding pretty hawkish (ie they think interest rates need to go up), but others have been sending out mixed signals, which is a real problem for the euro because it makes people wonder if the ECB is actually going to do anything. And to make matters worse, the Germans are getting less and less confident about their economy, which is making all the other countries in the eurozone worse off too.

Sterling Range-Bound as Bank of England Treads Carefully

The pound is trading pretty much in line at just under 1.335 at the moment. The Bank of England is playing it very careful, trying not to give any strong hints about whether it will cut interest rates or raise them, so its not giving the market much to go on. Right now, the pound is basically being driven by the same factors as the euro, ie all the uncertainty about energy prices and global trade.

As its currently trading at almost the same level to the euro, thats saying that the two economies have broadly similar problems. If the situation in the Middle East were to calm down a bit, that’s the one thing that might actually cause the currency markets to shift – but till then, neither currency’s going to make any big moves.

U.S. Dollar Index Battles Descending Triangle Resistance at 100.142 — Breakout or Rejection Imminent

The 2 hour chart for the DXY is showing some real tension – price is bouncing around inside a descending triangle, with a line of resistance up near 100.142 that’s keeping rallies in check. Meanwhile a support trendline from 98.41 is holding firm. Right now price is pressing against the 99.746 resistance zone – a zone that’s been rejecting a lot of buying attempts already.

The technicals are giving us some hope for a possible breakout – the shorter moving average has popped above the longer one, which is generally a bullish sign, and the RSI is heading up towards 65 with the moving average line also crossing higher, which is a sign of momentum building.

If we can get a clean close above 100.142 we could see price make a run for 100.538 and 100.894. But if it doesn’t happen – well we could see price pull back to 99.352.

Buy at 100.15, stop yourself out at 99.35, aiming for 100.89.

GBP/USD Compresses Inside Descending Triangle — $1.3292 Trendline Support Under Immediate Pressure

GBP/USD 2 hour chart is showing a pretty clear descending triangle forming here, with an upper trendline from 1.3575 and a lower one from 1.3218 converging fast. Right now price is pressing against the 1.3292 rising trendline of support after a bearish candle knocked it back from 1.3433 – a level that’s been reinforced by the long term moving average acting as a bit of a ceiling. The shorter term moving average is still above the long one and still pointing down, which is a bearish sign.

We’ve seen a bunch of doji and spinning top candles near 1.3345 which is a sign of distribution before this last leg lower. The RSI is also dropping fast, with the moving average lines crossing bearishly, which is a sign of momentum going the wrong way.

Sell at 1.3345, stop yourself out at 1.3434, targeting 1.3218.

EUR/USD Retreats to Rising Trendline Support at 1.1520 — Bulls Must Defend or Risk Slide to 1.1447

On the EUR/USD chart, you can see price has been falling pretty sharply from 1.1624 after a bearish candle knocked the long term moving average back. Now price is consolidating near 1.1520, which just happens to be the level of a rising trendline of support from 1.1410. The longer term moving average is actually starting to flatten out, which is a sign that momentum is waning, and the shorter term one is still pointing down, which is a bearish sign.

The RSI has taken a pretty big hit and is now heading down towards 38, with the moving average lines crossing bearishly – a clear sign that the momentum is shifting against the euro. The big ask for the bears now is to get past 1.1486 and we could see price make a run for 1.1447 and then 1.1410.

Sell at 1.1535, stop yourself out at 1.1625, aiming for 1.1447.