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FX snapshot: US Dollar Index, GBP/USD, EUR/GBP, AUD/USD

Dollar strength waning, yet GBP/USD seems likely to have another move lower in the tank.

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Source: Bloomberg

Dollar likely to suffer further losses after topping off
The strong upside move in the Dollar Basket has eased somewhat and the market is now looking like we could begin to trend lower to take back some of those gains. The 96.15 support level is one area to watch and for now it is providing the base for a short-term bounce.

However, I expect to see this represent a short-term phenomenon which will be sold into. Thus I am bearish for a move back towards 95.93 and 95.66 as long as price remains below 96.50 resistance.

Rise in GBP/USD unlikely to mark bullish reversal
The rise in GBP/USD this morning comes following a nice strong selloff this week. Considering that the Dollar Index is now looking relatively bearish, it would make sense that GBP/USD simultaneously turns higher.

However, I am hesitant given that this does not reflect a similar bottom or top which is typically sparked off by a sharp bearish engulfing candle. This therefore looks more like a short term retracement that will proceed another leg lower, towards the $1.5191-$1.517 support zone. 

Possible EUR/GBP double top being formed
The recent recovery in EUR/GBP brings it back into the range that has been respected for around a month now. Largely this market has been topping off between £0.734 and £0.74, the former of which has now been reached.

There is not a complete consistency with when it turns lower again and thus it’s a case of watching price action within this area. The failure to create a new higher high this morning is a possible initial warning sign of a selloff. I would need to see a closed candle below £0.7322 to gain confidence of a move lower for the pair.

Thus a close below £0.7322 would bring a completed double top and points towards a move to £0.7297 (double top projection) and £0.7285 (21 Sept resistance). A failure to break lower would make this look simply like consolidation for another move higher.

AUD/USD continues to trend lower
AUD/USD continues to trend lower in a very clear and consistent manner. This morning has seen another leg lower, which is likely to soon turn into another retracement higher back towards the 20-hour simple moving average.

Therefore, whilst I am bearish given the clear trend in play, I believe we have seen the majority of this latest step lower and would not see this as a good entry. The likeliness is that we will see another move higher soon and thus I expect a retracement within today’s European session to move back to the 20-hour SMA before selling off once more. Ultimately the next major level of support to look out for is $0.6908.

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